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On Friday, the EUR/USD pair continued trading sideways. Currently, quotes remain above the 200.0% Fibonacci level at 1.0857, but this holds little significance as there are no signals or strong movements in the market. The 1.0857 level itself is not particularly important in a sideways market, as the pair closed below it last week without any subsequent decline. A breakout from the sideways range is needed for clearer signals.
The wave structure on the hourly chart has evolved. The last completed downward wave broke the previous low, while the last upward wave surpassed the previous peak. This indicates the formation of a bullish trend. However, the current rally is impulsive, driven by fears of a slowdown in the U.S. economy due to measures taken by Donald Trump. This is arguably the primary reason for the recent decline in the U.S. dollar.
On Friday, the news flow was mixed. European reports were lackluster, while the most significant event of the day was the University of Michigan Consumer Sentiment Index, which fell from 64.7 to 57.9 in March. This drop is unsurprising, as Trump's policies are increasingly seen as a potential catalyst for a U.S. recession—a concern echoed by many economists. While a recession is not a certainty, its probability is tangible and growing each week. Thus, the decline in consumer sentiment is entirely understandable.
Despite this, traders showed little reaction to the report. They are waiting for Trump's next moves on import tariffs, which could provide clues about the likelihood of a recession and how the Federal Reserve might act in 2025. At this point, Trump's policy decisions are among the few factors significantly influencing the market.
On the 4-hour chart, the pair continues its upward movement after breaking out of a horizontal range. The trend remains bullish, confirmed by an ascending trend channel. A rebound from the 61.8% Fibonacci level at 1.0818 suggests the potential for further growth toward the 76.4% Fibonacci level at 1.0969.
However, bearish divergence on the CCI indicator and overbought conditions on the RSI indicate that the pair is ripe for a pullback, but bears are largely inactive. A break below 1.0818 would signal a potential decline toward 1.0696.
Over the last reporting week, professional traders opened 3,424 long positions and closed 19,772 short positions. As a result, the sentiment within the "Non-commercial" category has turned bullish again—thanks to Donald Trump. Currently, 188,000 long positions are held by speculators, compared to 175,000 short positions.
For twenty consecutive weeks, large players were reducing euro positions, but over the last five weeks, they have been unwinding short positions and increasing long positions. The divergence in monetary policy between the ECB and the Federal Reserve still favors the U.S. dollar due to interest rate differentials, but Trump's policies have become a more significant factor for traders, as they could push the FOMC toward a more dovish stance and even trigger a U.S. recession.
These two scheduled events are not major market movers, so the impact of the news background on market sentiment is expected to be weak on Monday.
Selling the pair is advisable only if it consolidates below 1.0818 on the 4-hour chart, with targets at 1.0734 and 1.0622. Buying remains an option, but I am cautious about the pair's strong and almost uninterrupted rally. I am wary of market moves where price advances in only one direction without corrections.
Fibonacci retracement levels are set from 1.0529 to 1.0213 on the hourly chart and from 1.1214 to 1.0179 on the 4-hour chart.
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