Relevance up to 08:00 2022-07-21 UTC–4
The EUR/USD pair continued the growth process on the hourly chart on Tuesday, securing above the corrective level of 261.8% (1.0196). Growth continues on Wednesday, in the direction of the 1.0315 level. As I said in previous articles, the euro currency can grow almost unhindered until tomorrow. The ECB will announce the results of the meeting tomorrow, and the market reaction may be absolutely unpredictable. Let me remind you that traders are already confident in raising the interest rate by 0.25%, which should cause new growth in the European currency. However, the euro currency has been growing since the beginning of the week and has already managed to add about 300 points. Therefore, the continuation of growth on Thursday, from my point of view, is not an absolute fait accompli. However, a second option is raising the rate by 0.50%. And this option may surprise traders who work in favor of the continued growth of the euro.
Thus, I would not like to guess what decision Christine Lagarde and her colleagues will make tomorrow or how traders will react. I will only say that inflation, which continues to rise, sharply increases the chances that the rate will be raised by 0.50% tomorrow. Or the ECB will announce several rate hikes in 2022. So far, we are talking about only two, but there may be more of them. For today, there is not a single interesting entry in the European Union and the United States in the calendar of economic events. However, we see that since the morning, traders are still predisposed to buying the European currency. Therefore, during the day, the euro can reach 1.0315. As for the longer-term perspective, the euro-dollar pair is now at the bottom in the truest sense of the word. It was traded lower only in 2000-2001. Thus, I see no obstacles for the pair to continue its fall. Unless the ECB suddenly gets involved in the fight against inflation, which is already 8.6%.
On the 4-hour chart, the pair reversed in favor of the EU currency and continued the growth process, having secured above the corrective level of 127.2% (1.0173). Now the growth of quotes can continue in the direction of the upper line of the descending trend corridor, which still characterizes the mood of traders as “bearish.” Emerging divergences are not observed in any indicator today. I will count on the strong growth of the euro only after consolidation over the descending corridor.
Commitments of Traders (COT) Report:
Last reporting week, speculators opened 102 long contracts and 8,494 short contracts. This means that the “bearish” mood of the major players has intensified again. The total number of long contracts concentrated in the hands of speculators is now 197 thousand, and short contracts – 222 thousand. The difference between these figures is not too big, but it is not in favor of the bulls. In recent months, the euro has mostly maintained a “bullish” mood in the category of “Non-commercial” traders, which did not help the euro currency itself in any way. In the last few weeks, the chances of a rise in the euro currency have been gradually growing, but recent COT reports have shown that new sales of the EU currency may now follow, as the mood of speculators has changed from “bullish” to “bearish.” This is exactly the development of events that we are witnessing at the moment.
News calendar for the USA and the European Union:
On July 20, the calendars of economic events of the European Union and the United States do not contain a single interesting entry. Thus, I believe that the influence of the information background on the mood of traders today will be absent. But the euro can continue its growth.
EUR/USD forecast and recommendations to traders:
I recommend new sales of the pair when rebounding from the upper line of the descending channel on the 4-hour chart or rebounding from any level on the hourly chart with the aim of the following levels. I recommend buying the euro currency when anchoring above the corridor on a 4-hour chart with a target of 1.0638.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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