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06.05.202415:31 Forex Analysis & Reviews: EUR/USD. May 6th. Weak payrolls deliver another blow to the dollar's coffin

The EUR/USD pair continued the growth process on Friday, which ended only in the resistance zone, consisting of four levels: 1.0764, 1.0785, 1.0797 and 1.0806. We can assume that a rebound from this resistance zone has been performed, but I do not expect a strong drop before consolidating under the uptrend channel. The rebound of quotes from these levels allows us to count only on a fall in the direction of the corrective level of 100.0%–1.0696. The bullish trend persists.

Exchange Rates 06.05.2024 analysis

The situation with the waves remains unchanged. The last wave down failed to get close to the low of the previous wave, and the new wave had already broken through the peak of the previous wave. Thus, a bullish trend has formed, but its prospects raise many questions. In the last 2-3 weeks, the information background has supported bull traders, but will it continue to support them? This is a big question since the EU economy is going through hard times, and the ECB is ready to start easing the PEPP much earlier than the Fed while having a much lower interest rate.

The background information on Friday showed that the American economy continues to slow down. Unemployment is rising, business activity in the service and manufacturing sectors is falling, and the number of Payrolls needs to satisfy traders. Things may seem better in the USA. 175 thousand new jobs were created in April. This number is below traders' expectations, but traders can expect super-high, unrealistic indicator values every month. Then, the dollar will fall every time, as traders expect values that are too high. Economic growth in the United States is slowing down, but it is still much higher than in the European Union. If we compare the economies of the EU and the United States, the latter remains much stronger and more stable. Thus, the growth of the European currency will not be long-lasting.

Exchange Rates 06.05.2024 analysis

On the 4-hour chart, the pair reversed in favor of the European currency and continued the growth process towards the upper line of the "wedge". A rebound of quotes from this line will favor the US dollar, and some fall in the direction of the corrective level of 23.6%–1.0644. Consolidating quotes above the "wedge" will increase the probability of continued growth towards the next Fibo level of 50.0%–1.0862. There are no emerging divergences today.

Commitments of Traders (COT) Report:

Exchange Rates 06.05.2024 analysis

During the last reporting week, speculators closed 111 long and 3323 short contracts. The mood of the "Non-commercial" group has changed to "bearish" and is rapidly increasing. The total number of long contracts concentrated in the hands of speculators now stands at 167 thousand, and short contracts – 173 thousand. I still believe the situation will continue to change in favor of the bears. In the second column, we see that the number of short positions has increased from 92 thousand to 173 thousand in the last three months. Over the same period, long positions decreased from 211 thousand to 167 thousand. Bulls have dominated the market for too long, and now they need a strong information background to resume the bullish trend. A few bad reports from the US supported the euro, but this is not enough in the long run.

News calendar for the USA and the European Union:

The European Union is the business activity index in the German service sector (07-55 UTC).

The European Union – Index of business activity in the service sector (08-00 UTC).

On May 6, the economic events calendar contains only two entries that have already become available to traders and have not affected their mood. The influence of the information background on the mood of traders will be absent for the rest of the day.

EUR/USD forecast and tips for traders:

Sales of the pair are possible today when quotes are fixed below the 1.0764 level on the hourly chart with a target of 1.0696. I would not have considered buying the euro currency before consolidating the pair above the level of 1.0806 on the hourly chart with targets of 1.0840 and 1.0874.

*Analiza tržišta koja se ovde nalazi namenjena je boljem razumevanju tržišta i ne pruža instrukcije za vršenje trgovanja.

Samir Klishi,
Analytical expert of InstaSpot
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