Fibonacci level

The EUR/USD pair executed a reversal in favor of the US currency on Friday and began a new decline, closing below the corrective level of 38.2% (1.0726). Thus, the overall decline of the pair may continue toward the next Fibonacci level at 23.6% (1.0652). A rebound from the level of 1.0652 will favor the euro and lead to some growth, while a close below it will increase the likelihood of a further decline toward the level of 1.0609.     On Friday, traders closely followed the US reports. There were many important events throughout the past week, but the labor market and unemployment data always held a special place in the hearts of traders. Without going into much detail, the statistics favored the bears, but the two most important reports showed different trends. The unemployment rate for May increased from 3.4% to 3.7%, although traders expected a rise to 3.5%. Meanwhile, nonfarm payrolls in May showed a result of +339K, exceeding expectations of +180K.   Thus, the unemployment rate turned out worse, but the payrolls were better. Traders concluded that the payroll report was more important (and I fully agree with them), so the dollar rose in price again. The US currency should continue to rise, as all recent statistical data indicates a good state of the American economy. The Federal Reserve (Fed) continues to maintain a "hawkish" position, and even after raising the interest rate to 5.25%, the economy continues to show growth, unemployment remains low, and the labor market creates more jobs almost every month than the market expects. These are compelling reasons for further dollar appreciation, as it has significantly lost value over the past year. On higher charts, there is a corrective potential towards the level of 1.03.     On the 4-hour chart, the pair reversed in favor of the euro, but the growth was short-lived. The quote decline may resume toward the corrective level of 38.2% (1.0610). A rebound of the pair's rate from this level will allow traders to expect a small increase toward the Fibonacci level of 50.0% (1.0941). If the quotes close below the level of 1.0610, the chances of further decline toward the Fibonacci level of 23.6% (1.0201) will increase.   Commitments of Traders (COT) report:   During the last reporting week, speculators closed 8,253 long and 242 short contracts. The sentiment of large traders remains "bullish" but has slightly weakened in recent weeks. The total number of long contracts speculators hold is 242,000, while short contracts amount to only 76,000. For now, strong bullish sentiment persists, but the situation will continue to change soon. The euro has been falling for two consecutive weeks. The high value of open long contracts suggests that buyers may close them soon (or may have already started, as indicated by the last two COT reports). There is currently an excessive tilt towards the bulls. The current figures allow for a continuation of the euro's decline soon.     News calendar for the United States and the European Union: Eurozone - Services Purchasing Managers' Index (08:00 UTC) USA - Services Purchasing Managers' Index (PMI) (13:45 UTC)   USA - Industrial Orders Volume (14:00 UTC) USA - ISM Non-Manufacturing Purchasing Managers' Index (PMI) (14:00 UTC)     On June 5, the economic events calendar includes three entries for the USA and one for the EU. The most important among them is the ISM index. The impact of the news background on traders' sentiment today may be moderate and occur in the second half of the day. Forecast for EUR/USD and trader advice: New pair sales could be opened on a breakout from the level of 1.0785 on the hourly chart, with targets at 1.0726 and 1.0652. I advise buying the pair on a breakout from the level of 1.0610 on the 4-hour chart, with targets at 1.0726 and 1.0784.      

Yesterday, on the hourly chart, the GBP/USD pair experienced a rebound from the corrective level of 127.2% (1.2777), then dropped nearly to 1.2676 and returned to the 1.2777 level. Another rebound from this level will favor the American currency, leading to a decline toward the Fibonacci level of 100.0% (1.2676). If the pair's rate closes above 1.2777, it increases the likelihood of further growth towards the next corrective level of 161.8% (1.2905).   Trading volumes have been sufficiently high recently, and trader sentiment remains bullish. In a few hours today, the Bank of England will announce its decision on the interest rate.   According to forecasts, the rate will increase by 0.25% again, with 7 out of 9 MPC committee members voting in favor of the hike. This decision has already been factored into current prices, but bullish traders are currently very strong and can accommodate the same rate hike twice.   There is no scheduled speech by Andrew Bailey in the economic events calendar; we must rely on meeting minutes and accompanying letters. Despite yesterday's weak inflation report, the market does not expect a 0.50% rate increase today. As a result, Powell's second speech may have an even greater impact on the pair's movement, but the issue is that these two events almost coincide. When the Fed President's speech begins, it will be difficult to determine whether or not the market pays attention to it.     Therefore, we should anticipate active trading today, but it doesn't necessarily mean the pair will move in one direction. It could be a situation similar to yesterday. On the 4-hour chart, the pair has reversed in favor of the British pound and resumed upward toward the 1.2860 level after two bullish divergences were formed in the RSI and CCI indicators. There are no new emerging divergences observed in any indicators today. If the pair's rate rebounds from the 1.2860 level, it would indicate a reversal in favor of the US dollar, resulting in a decline toward the Fibonacci level of 100.0% (1.2674).  

EUR/USD Last Friday, the euro could not consolidate below the support level of 1.0865, and the Marlin oscillator started to turn upward - our assumption regarding the euro's sideways movement in the 1.0865-1.0924 range has been confirmed. As a result, we are now expecting the price to rise to the upper band of the range, possibly hit it to reach the resistance of the MACD line (1.0942).     Consolidation of the price below 1.0865 opens the next target at 1.0834, but the distance to it is only 31 points, and a correction may occur from the level, just like what happened on June 30 and July 6 (green arrows). Consolidation above the MACD line (1.0942) opens the target range of 1.1012/48. On the four-hour chart, the price is trying to break out above the MACD line and consolidate above it.   The Marlin oscillator is already in the positive area. The conditions for the correction are ready. If the correction is standard, then even with this option, the two final targets are: 1.1012 - Fibonacci level of 38.2%, 1.1062 - level 50.0%. Stock markets closed mixed on Friday. We might witness an upward correction there.  

I previously mentioned that all the interesting events will start on Wednesday. Tuesday also had some interesting reports, particularly the UK unemployment or wage data. However, if these reports did influence market sentiment, they did it in a very strange way, and their values are quite difficult to interpret. For example, how can we characterize high wage growth? Is it good for the Brits or not? If wages are rising, it means inflation could start rising again (Bank of England Governor Andrew Bailey also mentioned this). Then the BoE might raise rates several more times, which are not currently taken into account in prices. But does the market believe in this, and is the BoE capable of easily and simply raising rates "several more times"? I doubt it. From this perspective, it seems that rising wages, like rising inflation, will no longer affect the central bank's actions.     The UK will release important GDP and industrial production data on Wednesday. It is estimated that in July, GDP will contract by 0.2-0.3% MoM, and industrial output will fall by 0.6-0.8%. Such reports are unlikely to support demand for the British currency. Unless the actual values turn out to be higher. However, it is very difficult to expect positive economic data from the British economy right now. The BoE's interest rate continues to rise, which means that financial conditions are deteriorating. At the same time, inflation remains high. It's a complex equation that will be very difficult for the BoE to solve. The US inflation report is much more important and it's also quite complex.   If we assume that inflation rose again in August, how might this affect the Fed's decision next week? There are reasons to believe that it won't have much impact. There are also grounds to believe that the rate might increase, although previously, the FOMC made decisions to raise rates once every two meetings. But two consecutive accelerations in inflation could persuade the monetary policy committee of the US central bank otherwise. Based on everything mentioned, there are many questions but no answers yet. I fear that the currency market may become quite active Wednesday and Thursday, but both instruments may frequently change their direction. In my opinion, it's best to use the Fibonacci level at 100.0% for the British pound as a reference point.   A successful breakthrough could pull down both instruments again. Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite feasible. Therefore, I will continue to sell the instrument with targets located near the levels of 1.0636 and 1.0483. A successful attempt to break through the 1.0788 level will indicate the market's readiness to sell further, and then we can expect to reach the targets I've been discussing for several weeks and months.   The wave pattern of the GBP/USD pair suggests a decline within the downtrend. There is a risk of completing the current downward wave if it is d, and not wave 1. In this case, the construction of wave 5 might start from the current marks. But in my opinion, we are currently witnessing the first wave of a new segment. Therefore, the most that we can expect from this is the construction of wave "2" or "b". An unsuccessful attempt to break the 1.2444 level, corresponding to 100.0% on the Fibonacci scale, may indicate the market's readiness to build an upward wave.  

The European Central Bank kept all three key interest rates unchanged. The market's reaction was altogether surprising, strange, expected, and logical. The euro initially rose by 25 pips but then it also lost the same amount in three hours. So the market's response to this significant event can be characterized by a 25-pip move. However, while the event itself was important, its results were not. As mentioned, the rates remained the same, and ECB President Christine Lagarde was quite neutral during the press conference. Here's what she talked about.   First, Lagarde said that she believed the current rates are at levels that will make a substantial contribution to returning inflation to the Bank's 2% target. Rates will need to be kept at their current levels for a sufficiently long duration, but eventually, the ECB will achieve its goal. Decisions on rates will be made based on incoming economic and financial data, and the dynamics of underlying inflation. The APP and PEPP programs (monetary stimulus programs) continue to reduce the ECB's balance sheet at a moderate pace, following the general plan. Lagarde also said that rate decisions will be made from meeting to meeting. This suggests that Lagarde keeps the door open for further rate hikes but the chances of seeing new tightening in the near future are extremely slim. I believe that the results of the meeting turned out to be neutral. I previously mentioned that there were no other options besides keeping rates at their current levels. However, I allowed for the possibility that Lagarde might hint at future rate hikes "if necessary" or, conversely, announce when policy easing would begin. Neither of these scenarios was mentioned. Based on this, I conclude that the market's 25-pip reaction was quite in line with the meeting's outcomes. However, the trading instrument could and should have shown much greater movement, given that two important reports were published in the United States, which turned out to be significantly stronger than market expectations. However, it seems that even these reports were ignored. Thus, the market's reaction to the ECB meeting was logical but if we look at the bigger picture, it actually wasn't. We expected the lack of market activity with such results, but it was quite strange to see such an outcome in conjunction with the GDP and durable goods orders reports in the United States. Based on the analysis, I conclude that a bearish wave pattern is still being formed. The pair has reached the targets around the 1.0463 level, and the fact that the pair has yet to break through this level indicates that the market is ready to build a corrective wave. A successful attempt to break through the 1.0637 level, which corresponds to the 100.0% Fibonacci level, would indicate the market's readiness to complete the formation of Wave 2 or Wave b. That's why I recommended selling. But we have to be cautious, as Wave 2 or Wave b may take on a more complex form.  

EUR/USD On Tuesday, the euro continued to face pressure from Monday, even slightly more so due to the decline in commodity prices (crude oil down 2.1%) and as U.S. Treasury yields fell. German industrial production dropped in September by 1.4% compared with the previous month (-3.86% YoY), which fueled concerns about a European recession. Now we are waiting to see if other news will support the euro's upward movement. However, we don't expect to receive any news today or tomorrow, unless Federal Reserve Chair Jerome Powell or John Williams suggests an the end to the rate hike cycle. On the other hand, a certain event that could exert pressure on the dollar would be the so-called U.S. "government shutdown", as the emergency 45-day funding measure is set to end on November 16. Congressional leaders struggle to reach an agreement over the 2024 budget year limit. Take note that market participants may already be preparing for this event.   On the daily chart, the lower shadow carefully tested the support of the MACD line. Now, the euro has established a consolidation range between yesterday's low and the Fibonacci level at 1.0665-1.0750. Settling below 1.0665 could lead to a decline towards the price channel line around the psychological level of 1.0500, while a move above 1.0750 opens the target range of 1.0834/57. The uptrend remains intact. On the 4-hour chart, the bullish momentum remains intact. After retreating, the price is now staying above the indicator lines, and the Marlin oscillator may form a bullish reversal from the neutral zero line.