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The EUR/USD pair rebounded from the level of 1.0942 and showed slight growth, but then turned in favor of the US currency and resumed the downward process towards the corrective level of 76.4% (1.0917). A rebound of quotes from the level of 1.0917 will work again in favor of the EC currency, with some growth towards the Fibonacci level of 100.0% (1.1035). A close below 1.0917 will significantly increase the probability of continuing to fall toward the next correction level of 61.8%, 1.0843.
Yesterday was not too interesting (trader activity was again low), but very important. The US released the inflation report for April. Traders were counting on a very slight slowdown in price growth but secretly hoped that the indicator's value would be different. Their hopes were not fulfilled - inflation fell to 4.9% y/y, and core inflation - to 5.5% y/y. Thus, both indicators decreased by only 0.1%. Such changes will unlikely affect the Fed's monetary policy at the next meeting. I remind you that, according to general opinion, the Federal Reserve has completed the tightening process and will resume it only in case of force majeure. A force majeure can be considered a slow inflation or growth fall. Since inflation fell slightly in April, the FOMC's policy remains unchanged.
Nevertheless, bearish traders continued to exert weak pressure on the pair yesterday and today. However, the movement remains horizontal. For bears to start a downward trend, a close below 1.0917 is required. Above this level, the bulls hold the initiative in their hands. The day started with a drop of 60 pips, but this is little and does not tell us that the bulls have left the market. The fall may be related to the Bank of England meeting, the results of which will be known in a few hours. There was no other news in the morning.
On the 4-hour chart, the pair consolidated below the ascending trend corridor. However, to confirm their intentions, bears now need to close below the corrective level of 50.0% (1.0941), which will allow them to count on a continuation of the fall toward the next corrective level of 38.2% (1.0610). A rebound of quotes from the level of 1.0941 will work in favor of the euro currency and the resumption of growth towards the level of 1.1273. For now, the horizontal movement is preserved.
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 3,316 long contracts and closed 773 short contracts. The sentiment of large traders remains "bullish" and continues to strengthen overall. The total number of long contracts concentrated in the hands of speculators now amounts to 247 thousand, and short contracts - only 73 thousand. The European currency has been growing for more than six months, but the news background does not always support the further strong growth of the pair. The ECB reduced the rate hike step to 0.25% last week, but the bulls have not yet retreated from the market. The difference between the number of long and short contracts is threefold, which speaks of the proximity of the moment when the bears will take the offensive. For now, strong "bullish" sentiment is preserved, but I think the situation will change soon. In recent weeks, the euro has maintained high positions but has not grown further.
News calendar for the US and the European Union:
European Union - Speech by ECB Representative Schnabel (12:00 UTC).
US - Producer Price Index (PPI) (12:30 UTC).
US - Number of initial unemployment benefit claims (12:30 UTC).
On May 11, the calendar of economic events contains several interesting entries, but the Bank of England meeting may have a greater impact on traders. The influence of the news background on the mood of traders for the rest of the day could be strong.
EUR/USD forecast and advice for traders:
Sales of the pair can be opened at a close below the level of 1.0917 on the hourly chart, with a target of 1.0843. Purchases are possible with a rebound from 1.0942 or 1.0917 on the hourly chart, with a target of 1.1035.
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