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On Tuesday, the EUR/USD pair declined to the support zone of 1.0336–1.0346, rebounded from it, reversed in favor of the euro, and rose to the resistance zone of 1.0435–1.0448. The technical signal worked perfectly. A rebound from this zone could favor the U.S. dollar and lead to a renewed decline toward 1.0336–1.0346. The bearish trend remains intact for now.
The wave structure remains clear. The last completed downward wave broke below the low of the previous wave, while the latest (still incomplete) upward wave has not yet surpassed the last peak. Thus, the bearish trend continues, with no signs of its conclusion. For this trend to end, a confident rise in the euro above 1.0460 and a close above it within the current wave are needed.
Tuesday's news backdrop was weak and somewhat odd. The European Union released several reports on economic sentiment, but these failed to garner interest from traders. After all, with the world glued to "live coverage" from the White House for the second consecutive day, European data takes a backseat.
In his first day of his second presidency, Donald Trump signed nearly a hundred executive orders and continued making announcements about the changes awaiting the U.S. and its global trade partners. As a result, markets are, as the Americans say, "a little nervous." So far, none of Trump's orders appear to directly affect the U.S. economy. None of the promised tariffs have been implemented yet, though sanctions on Canada and Mexico may take effect from February 1. However, with over a week left, Trump could change his mind or negotiate agreements with Mexico City or Ottawa. At this point, I still see no reasons to anticipate further dollar weakness, as even technical signals indicating a reversal of the bearish trend are lacking.
On the 4-hour chart, the pair retraced to 1.0332 and rebounded from it. Prices remain within a downward trend channel, signaling persistent bearish sentiment among traders. This suggests a likely reversal in favor of the dollar and renewed declines toward 1.0110. A rebound from the 127.2% Fibonacci corrective level at 1.0436 and the upper trendline could favor the U.S. currency.
Over the last reporting week, speculators closed 3,743 long positions and 7,470 short positions. The sentiment of the "Non-commercial" group remains bearish, indicating the likelihood of further declines in the pair. Speculators now hold 162,000 long positions and 223,000 short positions.
For eighteen consecutive weeks, major players have been shedding positions in the euro. This signals a persistent bearish trend with no exceptions. Occasionally, bulls dominate for brief periods, but these are outliers. The key driver of dollar weakness—expectations of Federal Reserve monetary easing—has already played out. While new factors may emerge (possibly this week), the U.S. dollar's rise still appears more likely. Technical analysis also supports the continuation of the long-term bearish trend. Thus, I expect further declines in EUR/USD.
For January 22, the economic calendar includes just one notable event. However, the market impact is expected to be minimal, as bold statements from Lagarde are unlikely.
Fibonacci levels are plotted at 1.0336–1.0630 on the hourly chart and 1.0603–1.1214 on the 4-hour chart.
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