01.03.2024 12:18 PM
EUR/USD. March 1st. Inflation will determine the fate of the euro

The EUR/USD pair executed a reversal in favor of the US dollar on Thursday, falling to the level of 1.0797, which forms another support zone with the level of 1.0785. Recently, several additional levels have formed on the chart. The euro is in a narrow price range, within which it constantly finds new levels of support and resistance. A rebound from the zone of 1.0785–1.0797 will work in favor of the European currency and resume growth towards the corrective level of 61.8%–1.0883.

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The wave situation remains quite clear. The last completed upward wave confidently broke the peak of the previous wave (from February 12), but at the moment, I consider it completed. Thus, we currently have a "bullish" trend, and there is no wave sign of its completion. However, fixing quotes below the corridor can be considered the first sign of a retreat by the bulls. In the near future, I expect the construction of a corrective wave down, which will not violate the "bullish" trend. But if the next upward wave fails to break the peak from February 22, we will get the first wave sign of a trend change to "bearish."

The information background on Thursday was diverse, but today is Friday, and the background will be no less interesting. I believe that for the euro, the key importance today will be the report on inflation in the European Union for February. Yesterday we learned that inflation in Germany fell to 2.5%. Today, European inflation may show the same value (or even lower). In my opinion, the execution of the forecast or a lower value will help bears break through the support zone of 1.0785–1.0797, leading to a further decline in the European currency. In the second half of the day, I advise paying attention to the ISM index in the USA.

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On the 4-hour chart, the pair executed a new rebound from the corrective level of 50.0%–1.0862. Thus, a reversal in favor of the US dollar was executed, and a decline toward the corrective level of 38.2%–1.0765 began. Consolidation above the level of 1.0862 increases the probability of a resumption of growth towards the corrective level of 61.8%–1.0959. There are no emerging divergences today for any indicator.

Commitments of Traders (COT) Report:

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In the last reporting week, speculators opened 2346 long contracts and closed 12823 short contracts. The sentiment of the "Non-commercial" group remains "bullish" but continues to weaken. The total number of long contracts concentrated in the hands of speculators is now 213 thousand, and short contracts – 145 thousand. I still believe that the situation will continue to change in favor of bears. Bulls have dominated the market for too long, and now they need strong news to maintain the "bullish" trend. At the same time, the total number of open long positions is less than the number of short (644K versus 665K). But such a balance of power has been observed for quite a long time.

News calendar for the US and the European Union:

European Union – Manufacturing Purchasing Managers' Index in Germany (08:55 UTC).

European Union – Manufacturing Purchasing Managers' Index (09:00 UTC).

European Union – Consumer Price Index (10:00 UTC).

European Union – Unemployment Rate (10:00 UTC).

US – Manufacturing Purchasing Managers' Index (14:45 UTC).

US – ISM Manufacturing Purchasing Managers' Index (15:00 UTC).

US – University of Michigan Consumer Sentiment Index (15:00 UTC).

On March 1st, the economic events calendar contains several entries, among which inflation in the EU and the ISM index in the USA stand out. The impact of the news background on traders' sentiment today can be quite strong both in the morning and in the afternoon.

Forecast for EUR/USD and trader advice:

Sales of the pair were possible on the rebound from the level of 1.0862 on the 4-hour chart with targets at 1.0823 and 1.0785. The first target was reached, the second – almost. New sales – when closing below 1.0823 with targets at 1.0785 and 1.0725. I will not consider buying the pair for now, as I believe that the decline in euro quotes will continue for some time.

Samir Klishi,
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