Forecast for EUR/USD on April 11. Why is the dollar not growing?
April 11, 2023 3:22 pm
On Monday, the EUR/USD pair experienced a sharp drop below the corrective level of 200.0% (1.0861). The decline did not last long. A reversal almost immediately followed it in favor of the European currency and a new growth process towards the 1.1000 level, which remains unattainable for bulls. Lately, the movement is more like a horizontal one, but it still favors bulls, as bears cannot or do not want to take the initiative in the market.
Analysts at Commerzbank believe that in the near term, the US dollar may find support from two factors at once. They think the strong labor market offers hope for a slight economic downturn. Last year, many predicted a recession for the US economy, but the last two quarters showed confident GDP growth. Many analysts expected the labor market to slow, but non-agricultural sector jobs continue to be created monthly in sufficient numbers, and unemployment is not growing. Commerzbank analysts also remind us that the decline in inflation (which is currently being observed in the US) is a positive factor for the national currency. In conjunction with a restrictive monetary policy, they may create a basis for the growth of the US currency in the near future. Economists also note that the sharp shift from “hawkish” to “dovish” rhetoric by the Federal Reserve could, on the contrary, put pressure on the US dollar, which has not been popular among traders in recent weeks.
The dollar can and should show growth in the near future as the Fed’s rate remains higher than the ECB’s rate and continues to grow. The US economy is growing much faster than the European Union’s economy. These two factors remain only to understand when bearish traders will switch to active actions against this backdrop.
On the 4-hour chart, the pair has consolidated above the sideways corridor, which allows traders to expect continued growth. It has not been possible to consolidate above the corrective level of 50.0% (1.0941), but the three “bearish” divergences have not allowed the decline to begin. Conversely, a new “bullish” divergence supports the bulls. Closing the quotes above the 1.0941 level will allow for the expectation of continued growth toward the corrective level of 61.8% (1.1273).
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 2,498 long contracts and 4,130 short contracts. The sentiment of large traders remains “bullish” and continues to strengthen overall. The total number of long contracts held by speculators now amounts to 225,000, while short contracts amount to 82,000. The European currency has been growing for over six months, but the number of long contracts among professional traders has stayed the same in the last few weeks. The situation remains favorable for the euro after a prolonged “black period,” so its prospects remain good. At least until the ECB raises the interest rate in increments of 0.50%. However, I would like to note that the market sentiment may change to “bearish” in the near future, as the ECB cannot constantly raise the rate by half a percent and may decrease the rate to 0.25% in May. Sell signals are present on both charts.
News calendar for the US and the European Union:
EU – retail trade (09:00 UTC).
On April 11th, the economic events calendar contains little interest. The only report of the day has already been released, but it has yet to impact traders’ sentiment. The influence of the news background on traders’ sentiment for the rest of the day will be absent.
EUR/USD forecast and advice for traders:
Sell orders for the pair can be opened upon a rebound from the 1.0941 level on the 4-hour chart, with targets at 1.0861 and 1.0750. Buy orders for the pair are possible upon closing above the 1.0941 level on the 4-hour chart with targets at 1.1000 and 1.1100.
The material has been provided by InstaForex Company – www.instaforex.com
Analysts at Commerzbank believe that in the near term, the US dollar may find support from two factors at once. They think the strong labor market offers hope for a slight economic downturn. Last year, many predicted a recession for the US economy, but the last two quarters showed confident GDP growth. Many analysts expected the labor market to slow, but non-agricultural sector jobs continue to be created monthly in sufficient numbers, and unemployment is not growing. Commerzbank analysts also remind us that the decline in inflation (which is currently being observed in the US) is a positive factor for the national currency. In conjunction with a restrictive monetary policy, they may create a basis for the growth of the US currency in the near future. Economists also note that the sharp shift from “hawkish” to “dovish” rhetoric by the Federal Reserve could, on the contrary, put pressure on the US dollar, which has not been popular among traders in recent weeks.
The dollar can and should show growth in the near future as the Fed’s rate remains higher than the ECB’s rate and continues to grow. The US economy is growing much faster than the European Union’s economy. These two factors remain only to understand when bearish traders will switch to active actions against this backdrop.
On the 4-hour chart, the pair has consolidated above the sideways corridor, which allows traders to expect continued growth. It has not been possible to consolidate above the corrective level of 50.0% (1.0941), but the three “bearish” divergences have not allowed the decline to begin. Conversely, a new “bullish” divergence supports the bulls. Closing the quotes above the 1.0941 level will allow for the expectation of continued growth toward the corrective level of 61.8% (1.1273).
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 2,498 long contracts and 4,130 short contracts. The sentiment of large traders remains “bullish” and continues to strengthen overall. The total number of long contracts held by speculators now amounts to 225,000, while short contracts amount to 82,000. The European currency has been growing for over six months, but the number of long contracts among professional traders has stayed the same in the last few weeks. The situation remains favorable for the euro after a prolonged “black period,” so its prospects remain good. At least until the ECB raises the interest rate in increments of 0.50%. However, I would like to note that the market sentiment may change to “bearish” in the near future, as the ECB cannot constantly raise the rate by half a percent and may decrease the rate to 0.25% in May. Sell signals are present on both charts.
News calendar for the US and the European Union:
EU – retail trade (09:00 UTC).
On April 11th, the economic events calendar contains little interest. The only report of the day has already been released, but it has yet to impact traders’ sentiment. The influence of the news background on traders’ sentiment for the rest of the day will be absent.
EUR/USD forecast and advice for traders:
Sell orders for the pair can be opened upon a rebound from the 1.0941 level on the 4-hour chart, with targets at 1.0861 and 1.0750. Buy orders for the pair are possible upon closing above the 1.0941 level on the 4-hour chart with targets at 1.1000 and 1.1100.
The material has been provided by InstaForex Company – www.instaforex.com
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