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On Friday, the EUR/USD pair dropped to the 50.0% Fibonacci correction level at 1.1320, rebounded, and turned in favor of the euro, subsequently rising toward the resistance zone of 1.1374–1.1380. From this zone, a rebound and a reversal in favor of the U.S. currency could follow today, with a decline back toward 1.1320. A close above 1.1374–1.1380 will increase the likelihood of continued euro growth toward the next 76.4% Fibonacci level at 1.1454.
The wave pattern on the hourly chart has changed. The last completed upward wave broke the previous peak, but the last downward wave broke the previous low. Therefore, the trend could shift to a "bearish" one. The recent news about the cancellation of tariff hikes for the EU and the mutual reduction of tariffs between China and the U.S. supported the bears. However, positive news for bears has dried up. Now Trump wants to raise tariffs on steel and aluminum, giving bulls a new basis for an offensive.
The news background on Friday was rather dull, as traders continued to focus primarily on trade war developments. The only news was that Trump's tariffs could not be overturned through court. The appellate court overturned the Trade Court's decision to cancel Trump's tariffs, and Trump himself stated that repealing the tariffs would lead to an economic collapse. Thus, bears had to retreat from the market again. Also, Germany's May Consumer Price Index was released, showing that inflation remained steady at 2.1%. It is unlikely that this report will affect the ECB's decision on another monetary policy easing this week. However, it is worth noting that the pace of inflation slowdown in the Eurozone is diminishing as it approaches the ECB's 2% target level. Therefore, the process of monetary easing in Europe may soon come to an end. This factor is not favorable for bears, as the euro continues to rise even with ongoing rate cuts.
On the 4-hour chart, the pair returned to the 100.0% Fibonacci corrective level at 1.1213 and rebounded from it. This rebound allowed a reversal in favor of the euro, with growth expected toward the 127.2% Fibonacci level at 1.1495. A close below 1.1213 would suggest a resumption of the decline toward the next 76.4% Fibonacci level at 1.0969. No emerging divergences are seen on any indicator.
Commitments of Traders (COT) Report:
During the last reporting week, professional traders closed 1,716 long positions and 6,737 short positions. The "Non-commercial" group's sentiment remains "bullish," thanks to Donald Trump. The total number of long positions held by speculators now stands at 204,000, while short positions amount to 124,000, with the gap (with rare exceptions) continuing to widen. Thus, the euro remains in demand, while the dollar does not. The situation remains unchanged.
For seventeen consecutive weeks, large traders have been reducing short positions and increasing long ones. The differences in monetary policy approaches between the ECB and the Fed still favor the dollar, but Donald Trump's policies remain a more significant factor for traders, as they could cause a recession in the U.S. economy and a host of other long-term structural problems.
Economic Calendar for the U.S. and Eurozone:
On June 2, the economic calendar includes five events, but only one can be considered important. The news background's influence on market sentiment is expected to be moderate and only in the second half of the day.
EUR/USD Forecast and Trading Tips:
Selling the pair is possible today upon a rebound from the 1.1374–1.1380 zone with targets at 1.1320 and 1.1260–1.1282. I advised buying today upon a rebound from any level on the hourly chart with a target at 1.1374–1.1380 — this target has been reached. A close above the 1.1374–1.1380 zone will allow keeping buy positions open with a target at 1.1454.
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