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EUR/USD rebounded on Thursday from the 38.2% Fibonacci retracement level at 1.1438, reversed in favor of the U.S. dollar, and consolidated below the 23.6% Fibonacci level at 1.1395. As a result, the decline may continue today toward the next Fibonacci level at 1.1325 (0.0%). A consolidation above 1.1395 would favor the euro and support a recovery toward 1.1438 and 1.1472.
The wave structure on the hourly chart remains bearish despite the bulls' prolonged, though weak, attempts to advance. The latest completed upward wave exceeded the previous high by only a few points, while the most recent downward wave broke below the previous low. Meanwhile, geopolitical tensions have escalated again as Iran and the United States have resumed hostilities and renewed the blockade of the Strait of Hormuz. A break above the 1.1473 high would be required to confirm the end of the bearish trend. However, the bulls have demonstrated little strength over the past three weeks.
Thursday's fundamental backdrop strongly favored the bulls. However, favorable news alone cannot drive the euro higher if traders are unwilling or unable to buy it. Yesterday provided a clear example of this. The European Central Bank (ECB) delivered a largely expected monetary policy decision, leaving all policy settings unchanged. ECB President Christine Lagarde stated that upside inflation risks have increased again, meaning the central bank could tighten monetary policy further before the end of the year if necessary. In other words, the ECB openly signaled its readiness to resume raising interest rates at any time. Nevertheless, this had virtually no impact on either the euro or bullish market sentiment. It is also worth noting that central banks rarely raise or cut interest rates at every meeting during a single policy cycle. Therefore, there is nothing unusual about the ECB's July pause. In my opinion, the euro declined without fundamental justification.
On the 4-hour chart, the pair remains in a sideways range. A consolidation below 1.1411 supports the case for further downside. However, price direction has changed too frequently in recent sessions, while overall trading activity remains subdued. No emerging divergences are currently visible on any technical indicator. The descending trend channel remains intact.
Commitments of Traders (COT) Report
During the latest reporting week, institutional traders opened 6,877 long positions and 3,255 short positions. Over the seven weeks spanning February and March, the bulls' overwhelming advantage disappeared because of the war involving Iran. During the subsequent sixteen weeks, market positioning stabilized amid the temporary ceasefire and hopes that the conflict would come to an end. Speculative traders currently hold approximately 230,000 long positions compared with 245,000 short positions.
Overall, large institutional participants continue to maintain a constructive long-term view on the euro. Nevertheless, global developments—of which there has been no shortage in recent years—continue to shape investor sentiment. In particular, the market remains focused on developments in the Middle East, where the conflict appears to alternate between ceasefires and renewed fighting. The market initially ignored the ceasefire and later paid little attention to the resumption of hostilities. As a result, geopolitical developments are no longer the sole factor determining the U.S. dollar's direction.
Economic Calendar
Germany
Eurozone
United States
The economic calendar for July 24 includes several important releases, with the German and Eurozone PMI data standing out as the key events. Economic data are likely to influence market sentiment throughout Friday.
EUR/USD Forecast and Trading Tips
Long positions may be considered today following a rebound from the 1.1325 level on the hourly chart or after a confirmed close above 1.1395, with upward targets at 1.1438 and 1.1472. Short positions became valid following a confirmed close below 1.1395 on the hourly chart or after a rejection from 1.1438, with a downward target at 1.1325. These short positions can still be held.
The Fibonacci retracement levels are drawn from 1.1620 to 1.1325 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.
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