EUR/USD. November 7th. Germany’s economy is going through challenging times
November 7, 2023 12:24 pm
The EUR/USD pair made a reversal in favor of the American currency on Monday, near the corrective level of 38.2% (1.0765), closing below 1.0714. Consequently, the decline in quotes may continue towards the next Fibonacci level at 23.6% (1.0644). Trader activity was weak yesterday and remains so today due to a virtually empty economic event calendar. I don’t expect a strong rally in the pair in the coming days.
The wave situation continues to be complex. In recent weeks, we’ve observed predominantly horizontal movement. As a result, waves alternate without forming clear trends. On Friday, we saw a strong upward wave against American reports, breaking through two previous peaks. However, this doesn’t necessarily indicate that the upward movement will continue. This week, we might witness more subdued trader activity and a micro-downward trend.
On Monday, Germany released a report on business activity in the service sector for October, which decreased from a satisfactory 50.3 to an unsatisfactory 48.2. In the European Union, a similar index dropped from 48.7 to 47.8. Consequently, bears received support from the news background yesterday and began gradually divesting themselves of the euro. Today, the news flow remains unfavorable to the euro. Germany’s industrial production figures for September were released, showing a 1.4% contraction, while traders were expecting no more than a 0.1% decrease. This is another report demonstrating the weakness of the European and, in particular, the German economies.
However, there is still a glimmer of hope. Inflation in the European Union has fallen below 3%, which means the ECB may start discussing interest rate cuts early next year. Nonetheless, for the euro, this is bad news, not good. The euro’s hope lies in the Federal Reserve’s rhetoric softening more rapidly.
On the 4-hour chart, the pair reversed in favor of the European currency and established itself above the corrective level at 100.0% (1.0639). However, a bearish divergence in the CCI indicator worked in favor of the US currency, causing a decline towards the 1.0639 level. If the pair closes below this level, we can expect further declines towards the next Fibonacci level at 127.2% (1.0466). There are no emerging divergences at the moment.
Commitments of Traders (COT) Report:
During the last reporting week, speculators closed 4,735 long contracts and 4,871 short contracts. The sentiment of large traders remains “bullish,” but it has noticeably weakened in recent weeks and months. The total number of long contracts held by speculators is now 210,000, while short contracts amount to 125,000. The gap is now less than double, whereas a few months ago, it was threefold. I believe the situation will continue to shift in favor of the bears. Bulls have dominated the market for too long, and they now need a strong news background to start a new “bullish” trend. Such a background is currently absent. Professional traders may continue to close their long positions in the near future. I believe the current figures allow for a continuation of the euro’s decline in the coming months.
News Calendar for the US and the European Union:
European Union – Germany’s Industrial Production (07:00 UTC).
On November 7th, the economic events calendar contains only one entry, which can hardly be considered significant. The influence of the news on traders’ sentiment on Tuesday may be very weak or absent.
Forecast for EUR/USD and trading advice:
Buying the pair was possible on the hourly chart when it rebounded from the level at 1.0524, with targets at 1.0644 and 1.0714. Both targets have been reached. I do not recommend considering new purchases for now. As for sales, I recommended them yesterday when the pair closed below 1.0714 with a target of 1.0644 and below.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD pair made a reversal in favor of the American currency on Monday, near the corrective level of 38.2% (1.0765), closing below 1.0714. Consequently, the decline in quotes may continue towards the next Fibonacci level at 23.6% (1.0644). Trader activity was weak yesterday and remains so today due to a virtually empty economic event calendar. I don’t expect a strong rally in the pair in the coming days.
The wave situation continues to be complex. In recent weeks, we’ve observed predominantly horizontal movement. As a result, waves alternate without forming clear trends. On Friday, we saw a strong upward wave against American reports, breaking through two previous peaks. However, this doesn’t necessarily indicate that the upward movement will continue. This week, we might witness more subdued trader activity and a micro-downward trend.
On Monday, Germany released a report on business activity in the service sector for October, which decreased from a satisfactory 50.3 to an unsatisfactory 48.2. In the European Union, a similar index dropped from 48.7 to 47.8. Consequently, bears received support from the news background yesterday and began gradually divesting themselves of the euro. Today, the news flow remains unfavorable to the euro. Germany’s industrial production figures for September were released, showing a 1.4% contraction, while traders were expecting no more than a 0.1% decrease. This is another report demonstrating the weakness of the European and, in particular, the German economies.
However, there is still a glimmer of hope. Inflation in the European Union has fallen below 3%, which means the ECB may start discussing interest rate cuts early next year. Nonetheless, for the euro, this is bad news, not good. The euro’s hope lies in the Federal Reserve’s rhetoric softening more rapidly.
On the 4-hour chart, the pair reversed in favor of the European currency and established itself above the corrective level at 100.0% (1.0639). However, a bearish divergence in the CCI indicator worked in favor of the US currency, causing a decline towards the 1.0639 level. If the pair closes below this level, we can expect further declines towards the next Fibonacci level at 127.2% (1.0466). There are no emerging divergences at the moment.
Commitments of Traders (COT) Report:
During the last reporting week, speculators closed 4,735 long contracts and 4,871 short contracts. The sentiment of large traders remains “bullish,” but it has noticeably weakened in recent weeks and months. The total number of long contracts held by speculators is now 210,000, while short contracts amount to 125,000. The gap is now less than double, whereas a few months ago, it was threefold. I believe the situation will continue to shift in favor of the bears. Bulls have dominated the market for too long, and they now need a strong news background to start a new “bullish” trend. Such a background is currently absent. Professional traders may continue to close their long positions in the near future. I believe the current figures allow for a continuation of the euro’s decline in the coming months.
News Calendar for the US and the European Union:
European Union – Germany’s Industrial Production (07:00 UTC).
On November 7th, the economic events calendar contains only one entry, which can hardly be considered significant. The influence of the news on traders’ sentiment on Tuesday may be very weak or absent.
Forecast for EUR/USD and trading advice:
Buying the pair was possible on the hourly chart when it rebounded from the level at 1.0524, with targets at 1.0644 and 1.0714. Both targets have been reached. I do not recommend considering new purchases for now. As for sales, I recommended them yesterday when the pair closed below 1.0714 with a target of 1.0644 and below.
The material has been provided by InstaForex Company – www.instaforex.com
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