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On Friday, EUR/USD advanced to the 100.0% Fibonacci retracement level at 1.1409 and rebounded from it. As a result, the pair began to decline toward the 127.2% Fibonacci retracement level at 1.1290. A consolidation above the 1.1409 level would favor the euro and signal a continuation of the upward move toward the next Fibonacci retracement level of 76.4% at 1.1514. However, the bears currently appear extremely weak. A strong rally in the euro remains unlikely, but I would not ignore bullish trading signals.
The wave structure on the hourly chart remains bearish. The most recently completed downward wave broke below the previous low, while the latest upward wave failed to break above the previous high. Geopolitical conditions have improved significantly in recent weeks, yet the Federal Reserve triggered another bearish wave of selling that has yet to run its course. A full-scale bearish continuation would require additional catalysts, which I do not currently see. Even so, the bulls are offering very little resistance.
Friday's economic calendar was virtually empty, with the only notable release being the University of Michigan Consumer Sentiment Index in the United States. The indicator came in below expectations, allowing the euro to outperform the U.S. dollar for most of the session. Nevertheless, it failed to post any meaningful gains.
On Monday, the only major event will be a speech by European Central Bank President Christine Lagarde. In recent weeks, ECB officials have delivered mixed messages. Some policymakers have supported further monetary tightening, arguing that the conflict in the Middle East has caused lasting damage to the European economy. Others believe there is no need to rush, pointing to the de-escalation of the conflict, the decline in oil prices back to pre-conflict levels, and the possibility that inflation may begin to ease in the coming months. Lagarde herself has maintained a neutral stance and has refrained from signaling another rate hike. Therefore, if the ECB President hints at additional policy tightening in July, bullish traders could receive fresh support. Admittedly, the market paid little attention to the ECB's tightening measures in June. Even so, Lagarde's comments could still provide support for the euro.
On the 4-hour chart, the pair has consolidated below the 100.0% Fibonacci retracement level at 1.1411, allowing traders to anticipate a continuation of the euro's decline. At the same time, the CCI indicator has formed a bullish divergence, while the RSI indicates overbought conditions, both of which have temporarily halted the bears' advance. A consolidation above the 1.1411 level would strengthen the case for a more pronounced recovery in the euro and a return to the downward trend channel.
During the latest reporting week, professional traders opened 19,327 Long positions and 23,522 Short positions. Over the seven weeks spanning February and March, the bulls' overwhelming advantage disappeared due to the conflict involving Iran. During the past thirteen weeks, however, the situation has gradually stabilized following the suspension of hostilities in the Middle East, allowing the bulls to regain the upper hand. Speculative traders currently hold approximately 247,000 Long positions versus 217,000 Short positions.
Overall, major market participants continue to favor the euro from a long-term perspective. Naturally, the numerous geopolitical and macroeconomic events that have shaped recent years continue to influence investor sentiment. At present, market attention remains focused on the Middle East, where the conflict has been paused and serious negotiations are underway that could ultimately lead to a lasting peace agreement. However, the market continues to ignore both the improvement in the geopolitical environment and many other factors that are supportive of the euro.
Eurozone:
The economic calendar for June 29 contains only one scheduled event. As a result, the macroeconomic backdrop is expected to have only a limited impact on market sentiment on Monday, primarily during the evening session.
Buy: Long positions may be considered following a confirmed close above the 1.1409 level on the hourly chart, with a target at 1.1514.
Sell: New short positions may be considered following a rebound from the 1.1409 level on the hourly chart, targeting the 1.1290 level.
Fibonacci grids are drawn from 1.1409 to 1.1850 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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