22.05.2024 01:49 PM
EUR/USD. May 22nd. Bulls and bears take a break together

On Tuesday, the EUR/USD pair continued to trade horizontally between the levels of 1.0837 and 1.0892. This sideways trend has persisted for five days, with bulls and bears taking a break together. Consolidation of the pair above the Fibonacci level of 76.4%–1.0892 will increase the likelihood of further growth of the European currency towards the next corrective level of 100.0%–1.0982. Consolidation below the level of 1.0837 will favor the US dollar and lead to some decline towards the lower boundary of the ascending trend channel.

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The wave situation remains unchanged. The last downward wave ended on May 1 and did not reach the low of the previous wave, while the new upward wave has already broken the peak of the previous wave and has been forming for 13 days. Thus, a "bullish" trend has formed, and bullish traders attack almost daily. I consider this trend quite unstable and believe it will only last for a while. Nevertheless, the pair has been rising for a month, and bears have been unable to push it down even to the lower boundary of the corridor. Therefore, there are no signs of the "bullish" trend ending.

There was no informational background on Tuesday, just like on Monday. The lack of news can explain the traders' passivity. However, any currency pair usually does not trade in just one direction. When bulls get tired, bears reclaim some positions. Right now, we do not see any pullbacks or corrections. It feels like traders are either ready to buy euros or do nothing. Today, ECB President Christine Lagarde is scheduled to speak. Her speech may stir the market because trading with such movements is impossible. A "dovish" rhetoric could help the pair dip slightly.

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On the 4-hour chart, the pair consolidated above the "wedge" and rose to the Fibonacci level of 50.0%–1.0862. The last segment of the euro's rise seems somewhat ambiguous, so I am unsure about its continuation. However, for a decline to be expected, we need sell signals, which are currently absent. No impending divergences are observed today, either. The growth process may continue towards the next corrective level of 61.8%–1.0959. The only factor against the euro is the overbought RSI indicator (above +80).

Commitments of Traders (COT) Report:

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During the last reporting week, speculators opened 7,804 long contracts and closed 4,761 short contracts. The sentiment of the "Non-commercial" group turned "bearish" several weeks ago, but now bulls have the upper hand again. The total number of long contracts held by speculators is now 178,000, while the number of short contracts is 161,000. However, the situation will continue to change in favor of the bears. The second column shows that the number of short positions has increased from 140,000 to 161,000 over the last three months. During the same period, long positions decreased from 202,000 to 178,000. Bulls have dominated the market for too long, and now they need a strong informational background to resume the "bullish" trend. A series of poor reports from the US supported the euro, but more is needed in the long term.

News Calendar for the USA and Eurozone:

  • Eurozone – ECB President Christine Lagarde's speech (08:05 UTC).
  • USA – New Home Sales (14:00 UTC).
  • USA – FOMC Minutes (18:00 UTC).

The economic events calendar for May 22 contains several interesting entries, with Christine Lagarde's speech standing out. The informational background may moderately influence traders' sentiment today.

Forecast for EUR/USD and Trading Tips:

Selling the pair is possible in the event of a rebound from the 1.0892 level on the hourly chart with targets at 1.0837 or in a close below 1.0837 with targets at 1.0785. Euro purchases could have been opened on a rebound from the 1.0837 level on the hourly chart, with targets at 1.0892. This target was almost reached. New purchases are possible with a new rebound from 1.0837 or on a close above 1.0892 with a target of 1.0982.

Samir Klishi,
Analytical expert of InstaForex
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