On Monday, the EUR/USD pair recorded its third rebound from the 38.2% Fibonacci retracement level at 1.1718 and began an upward move toward the resistance level of 1.1795–1.1802. A rebound from this zone would favor the U.S. currency and lead to a moderate decline toward the 1.1718 level. A consolidation above this zone would increase the likelihood of further growth toward the next retracement level at 0.0% – 1.1919.
The wave structure on the hourly chart remains straightforward. The last completed upward wave broke above the previous wave's peak, while the new downward wave failed to break the previous low. Thus, the trend officially remains "bullish." It would be hard to call it strong, but in recent weeks bulls have regained confidence and launched fresh attacks. The easing of the Fed's monetary policy supports further euro appreciation, and the ECB will not create any problems for the single currency in the near future.
There was no notable news background on Monday, yet bulls became active for unclear reasons. However, in my view, everything is unfolding in a logical manner. The "bullish" trend persists across all trading systems and indicators, and last week's news background will not support the U.S. dollar. Last week, an abundance of information from both the European Union and the United States made the market nervous and caused sharp swings. There was simply too much information, so not everyone was able to draw the correct conclusions immediately. However, the U.S. labor market showed no recovery, despite the Nonfarm Payrolls figure being higher than traders had expected. This indicator has a certain threshold below which almost any value can be considered negative. The labor market is slowing even when 50–100 thousand new jobs are created. Thus, the November figure of 60 thousand is not positive, even though it exceeded forecasts. At the same time, the unemployment rate jumped sharply to 4.6%. Taken together, the situation for the dollar did not improve.
On the 4-hour chart, the pair previously reversed in favor of the U.S. dollar after a "bearish" divergence formed on the CCI indicator. However, yesterday on the hourly chart a reversal occurred in favor of the European currency, meaning that on the 4-hour chart the growth process may also continue toward the 0.0% Fibonacci level at 1.1829. No emerging divergences are observed on any indicator today.
Commitments of Traders (COT) report:
During the latest reporting week, professional players opened 18,446 long positions and closed 11,889 short positions. Sentiment among the "Non-commercial" group remains bullish thanks to Donald Trump and his policies, and it continues to strengthen over time. The total number of long positions held by speculators now stands at 268,000, while short positions amount to 129,000. This represents more than a twofold advantage for the bulls.
For thirty-three consecutive weeks, large players were reducing short positions and increasing long ones. Then the shutdown began, and now we are seeing the same picture again: bulls continue to build long positions. Donald Trump's policies remain the most significant factor for traders, as they generate numerous problems that will have long-term and structural consequences for the United States—for example, the deterioration of the labor market. Despite the signing of several important trade agreements, analysts fear a recession in the U.S. economy, as well as a loss of the Fed's independence under pressure from Trump and against the backdrop of Jerome Powell's expected resignation in May next year.
News calendar for the U.S. and the European Union:
On December 23, the economic calendar contains three noteworthy entries. The impact of the news background on market sentiment on Tuesday will be felt in the second half of the day.
EUR/USD forecast and trading advice:
Selling the pair is possible if prices rebound from the 1.1795–1.1802 level on the hourly chart, with a target at 1.1718. Long positions could be opened on a rebound from the 1.1718 level with targets at 1.1795–1.1802. Today, these trades can be kept open. If prices close above the 1.1795–1.1802 level, positions can be left open with targets at 1.1829 and 1.1919.
The Fibonacci grids are drawn from 1.1392 to 1.1919 on the hourly chart and from 1.1066 to 1.1829 on the 4-hour chart.
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