EUR/USD. July 7th. Lagarde: don’t expect a quick return of inflation to 2%
July 7, 2023 11:21 am
This Thursday, the EUR/USD pair experienced a significant rise of 60 points, followed by a similar drop. Due to the strong news background, the corrective level of 38.2% (1.0868) did not pose a serious obstacle to quotes. In the day’s first half, bullish traders managed to surpass this, suggesting a high chance for the euro to continue its upward movement. However, in the day’s latter half, bears swiftly took the upper hand thanks to strong US statistics.
I suggest focusing on other indicators and types of analysis under such circumstances. We observe that Thursday’s decline in the pair didn’t break the low of the last down wave. Therefore, while the euro’s drop has been halted, it doesn’t necessarily signal the end of the “bearish” trend. This could be a brief pause or a period of stability. The last upward wave’s peak remains unbroken. Even today, when there was an opportunity to break yesterday’s wave peak (1.0901), it didn’t occur. The current situation suggests that the market might be entering a period of pause.
Christine Lagarde pointed out yesterday that the journey of the ECB to return inflation to its target level would be lengthy. As per her statement, inflation is on a downward trend, yet it will take a substantial amount of time for this trend to continue at the current pace. The ongoing tightening of quantitative easing will pressure the consumer price index. However, the regulator will persist in taking necessary measures to prevent its weakening.
Today, the US will release crucial payroll reports, unemployment, and wages reports. Although the last report’s importance is relatively low, it directly influences inflation. As I previously mentioned, today’s market movement might mirror Thursday’s, enhancing the chance of a sideways trend. I anticipate an increase in the dollar today, reaching 1.0840.
The 4-hour chart shows the pair’s ongoing decline. The downward trending line reflects a “bearish” market sentiment. Two “bullish” divergences failed to shift the traders’ sentiment towards a “bullish” outlook. Consequently, I foresee a further fall toward the corrective level of 50.0% (1.0811). The pair’s exchange rate establishing itself above the trendline would favor the EU currency and a minor rise toward the Fibo level of 23.6% (1.0962).
Commitments of Traders (COT) report:
In the last reporting week, speculators closed 5422 long contracts and 5801 short contracts. The dominant sentiment among major traders continues to be “bullish,” albeit gradually losing momentum. Speculators now hold 224 thousand long contracts and only 79 thousand short contracts. Despite the ongoing “bullish” sentiment, I believe the situation will alter shortly. The European currency has seen more frequent falls than rises over the past two months. The high number of open long contracts suggests that buyers may begin to close them soon (or might have already started, as hinted by recent COT reports) – there’s a notable bullish bias. I infer from the current figures that the euro could experience a new decline soon.
News calendar for the US and the European Union:
US – Average hourly earnings (12:30 UTC).
US – Unemployment rate (12:30 UTC).
US – Changes in non-farm employment (12:30 UTC).
On July 7, the economic events calendar includes several important entries from the US. The impact of the news background on traders’ sentiment for the rest of the day could be significant.
EUR/USD forecast and trader advice:
Sales were possible upon a rebound from the 1.0923 level on the hourly chart, with targets at 1.0868 and 1.0824. The first target has been reached, and the second has almost been reached. Only minor purchases on the “bearish” trend are possible for the pair. At the moment, there are no signals for purchases. I advise paying attention only after closing above the trend line on the 4-hour chart for serious purchases.
The material has been provided by InstaForex Company – www.instaforex.com
This Thursday, the EUR/USD pair experienced a significant rise of 60 points, followed by a similar drop. Due to the strong news background, the corrective level of 38.2% (1.0868) did not pose a serious obstacle to quotes. In the day’s first half, bullish traders managed to surpass this, suggesting a high chance for the euro to continue its upward movement. However, in the day’s latter half, bears swiftly took the upper hand thanks to strong US statistics.
I suggest focusing on other indicators and types of analysis under such circumstances. We observe that Thursday’s decline in the pair didn’t break the low of the last down wave. Therefore, while the euro’s drop has been halted, it doesn’t necessarily signal the end of the “bearish” trend. This could be a brief pause or a period of stability. The last upward wave’s peak remains unbroken. Even today, when there was an opportunity to break yesterday’s wave peak (1.0901), it didn’t occur. The current situation suggests that the market might be entering a period of pause.
Christine Lagarde pointed out yesterday that the journey of the ECB to return inflation to its target level would be lengthy. As per her statement, inflation is on a downward trend, yet it will take a substantial amount of time for this trend to continue at the current pace. The ongoing tightening of quantitative easing will pressure the consumer price index. However, the regulator will persist in taking necessary measures to prevent its weakening.
Today, the US will release crucial payroll reports, unemployment, and wages reports. Although the last report’s importance is relatively low, it directly influences inflation. As I previously mentioned, today’s market movement might mirror Thursday’s, enhancing the chance of a sideways trend. I anticipate an increase in the dollar today, reaching 1.0840.
The 4-hour chart shows the pair’s ongoing decline. The downward trending line reflects a “bearish” market sentiment. Two “bullish” divergences failed to shift the traders’ sentiment towards a “bullish” outlook. Consequently, I foresee a further fall toward the corrective level of 50.0% (1.0811). The pair’s exchange rate establishing itself above the trendline would favor the EU currency and a minor rise toward the Fibo level of 23.6% (1.0962).
Commitments of Traders (COT) report:
In the last reporting week, speculators closed 5422 long contracts and 5801 short contracts. The dominant sentiment among major traders continues to be “bullish,” albeit gradually losing momentum. Speculators now hold 224 thousand long contracts and only 79 thousand short contracts. Despite the ongoing “bullish” sentiment, I believe the situation will alter shortly. The European currency has seen more frequent falls than rises over the past two months. The high number of open long contracts suggests that buyers may begin to close them soon (or might have already started, as hinted by recent COT reports) – there’s a notable bullish bias. I infer from the current figures that the euro could experience a new decline soon.
News calendar for the US and the European Union:
US – Average hourly earnings (12:30 UTC).
US – Unemployment rate (12:30 UTC).
US – Changes in non-farm employment (12:30 UTC).
On July 7, the economic events calendar includes several important entries from the US. The impact of the news background on traders’ sentiment for the rest of the day could be significant.
EUR/USD forecast and trader advice:
Sales were possible upon a rebound from the 1.0923 level on the hourly chart, with targets at 1.0868 and 1.0824. The first target has been reached, and the second has almost been reached. Only minor purchases on the “bearish” trend are possible for the pair. At the moment, there are no signals for purchases. I advise paying attention only after closing above the trend line on the 4-hour chart for serious purchases.
The material has been provided by InstaForex Company – www.instaforex.com
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