EUR/USD analysis on October 5, 2023. Bulls make another attempt to regain control
October 5, 2023 10:22 am
On Wednesday, the EUR/USD pair reversed in favor of the European currency and consolidated above the level of 1.0489. Thus, the uptrend may continue towards the next Fibonacci level of 161.8% at 1.0561. A bounce from this level will favor the US dollar and prompt a decline towards 1.0489 and below. Closing above 1.0561 will increase the chances of continuing growth towards the next level of 1.0637.
Earlier I mentioned that it might take a few days to complete the bearish trend. Yesterday, we saw an emerging upward wave, which so far does not affect the overall picture. Now this wave must continue at least until the level of 1.0630 so that we can state the end of the bearish trend. The second scenario implies the formation of a new downward wave that will be unable to break through the low of the current wave.
The informational background of yesterday was mixed. The business activity indices in the services sectors of Germany and the EU were moderately pleasing. They did not cause a euphoria but they were still above traders’ expectations, which allowed the European currency to recover a bit. At the same time, the report on retail sales in the European Union turned out to be weaker than expected, but the euro is now quite heavily oversold, so this report had less impact. In general, the data from the EU can hardly be called encouraging. It turned out to be a little better than it could have been. The euro received quite modest support, and it is unclear what will drive its growth today. A new fall in the pair is not ruled out. Especially if US nonfarm payrolls and unemployment show strong values at the end of the week.
On the 4-hour chart, the pair has dropped to the retracement level of 127.2% at 1.0466. A bounce off this level opens the way towards the upper line of the descending trend channel. I wouldn’t anticipate a stronger rise in the euro until there is a close above this channel. If the pair settles below the level of 1.0466, it will favor the US currency and extend a decline towards the next correction level of 161.8% at 1.0245.
Commitments of Traders (COT):
In the last reporting week, speculators opened 4,092 Long contracts and 7,674 Short contracts. The sentiment of large market players remains bullish but has been noticeably weakening in recent weeks and months. The total number of Long contracts now stands at 21,000 and Short contracts amount to 113,000. The difference is only twofold, although a few months ago the gap was threefold. I think that the situation will continue to change in favor of the bears over time. Bulls have dominated the market for too long, and now they need a strong informational background to maintain the bullish trend. There is no such background now. The high volume of open Long contracts indicates that professional traders may continue to close them in the near future. I think that the current values suggest a further decline in the euro in the coming months.
Economic Calendar for US and EU:
US – Initial Jobless Claims (12-30 UTC).
On October 5, the economic calendar has one entry of minor importance. Therefore, the information background will have little or no influence on the market sentiment today.
EUR/USD forecast and trading tips:
It is possible to sell the pair today after a rebound from the 1.0561 level on H1, aiming for 1.0489 and 1.0450. Earlier, I recommended buying after a close above 1.0489 on H1 with the target at 1.0561. These positions can be kept open for now. In case of a close above 1.056, the entry point for long positions will be at 1.0620.
The material has been provided by InstaForex Company – www.instaforex.com
On Wednesday, the EUR/USD pair reversed in favor of the European currency and consolidated above the level of 1.0489. Thus, the uptrend may continue towards the next Fibonacci level of 161.8% at 1.0561. A bounce from this level will favor the US dollar and prompt a decline towards 1.0489 and below. Closing above 1.0561 will increase the chances of continuing growth towards the next level of 1.0637.
Earlier I mentioned that it might take a few days to complete the bearish trend. Yesterday, we saw an emerging upward wave, which so far does not affect the overall picture. Now this wave must continue at least until the level of 1.0630 so that we can state the end of the bearish trend. The second scenario implies the formation of a new downward wave that will be unable to break through the low of the current wave.
The informational background of yesterday was mixed. The business activity indices in the services sectors of Germany and the EU were moderately pleasing. They did not cause a euphoria but they were still above traders’ expectations, which allowed the European currency to recover a bit. At the same time, the report on retail sales in the European Union turned out to be weaker than expected, but the euro is now quite heavily oversold, so this report had less impact. In general, the data from the EU can hardly be called encouraging. It turned out to be a little better than it could have been. The euro received quite modest support, and it is unclear what will drive its growth today. A new fall in the pair is not ruled out. Especially if US nonfarm payrolls and unemployment show strong values at the end of the week.
On the 4-hour chart, the pair has dropped to the retracement level of 127.2% at 1.0466. A bounce off this level opens the way towards the upper line of the descending trend channel. I wouldn’t anticipate a stronger rise in the euro until there is a close above this channel. If the pair settles below the level of 1.0466, it will favor the US currency and extend a decline towards the next correction level of 161.8% at 1.0245.
Commitments of Traders (COT):
In the last reporting week, speculators opened 4,092 Long contracts and 7,674 Short contracts. The sentiment of large market players remains bullish but has been noticeably weakening in recent weeks and months. The total number of Long contracts now stands at 21,000 and Short contracts amount to 113,000. The difference is only twofold, although a few months ago the gap was threefold. I think that the situation will continue to change in favor of the bears over time. Bulls have dominated the market for too long, and now they need a strong informational background to maintain the bullish trend. There is no such background now. The high volume of open Long contracts indicates that professional traders may continue to close them in the near future. I think that the current values suggest a further decline in the euro in the coming months.
Economic Calendar for US and EU:
US – Initial Jobless Claims (12-30 UTC).
On October 5, the economic calendar has one entry of minor importance. Therefore, the information background will have little or no influence on the market sentiment today.
EUR/USD forecast and trading tips:
It is possible to sell the pair today after a rebound from the 1.0561 level on H1, aiming for 1.0489 and 1.0450. Earlier, I recommended buying after a close above 1.0489 on H1 with the target at 1.0561. These positions can be kept open for now. In case of a close above 1.056, the entry point for long positions will be at 1.0620.
The material has been provided by InstaForex Company – www.instaforex.com
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