21.05.202413:15 Forex Analysis & Reviews: Forecast of EUR/USD pair on May 21, 2024

On Monday, the EUR/USD pair reversed in favor of the US dollar and began a new decline toward the corrective level of 61.8% (1.0837). A rebound from this level would favor the euro and lead to some growth towards the 76.4% Fibonacci level at 1.0892. Consolidation below the 1.0837 level would favor further decline towards the support zone at 1.0785–1.0797. However, the "bullish" trend will remain intact even if the pair falls into this zone.

The wave situation remains unchanged. The last downward wave ended on May 1 and failed to reach the low of the previous wave, while the new upward wave has already broken the peak of the previous wave and has been forming for 13 days. Thus, a "bullish" trend has formed, and bullish traders are attacking almost daily. I find this trend rather unstable and wonder if it will last long. Nonetheless, the upward movement continued for a month, and bears could not push the pair even to the lower boundary of the channel. Therefore, there are no signs of the "bullish" trend ending.

There was no informational background on Monday, which explains the very low trader activity. Additionally, low trader activity has been observed for quite some time, which hasn't prevented the euro from showing steady growth. Therefore, it is more accurate to speak of weak bull activity and the absence of bear activity, which have ensured the euro's growth almost daily. I do not expect strong movements since there was no new information on Monday. There will also be a few news releases on Tuesday, so the euro might continue fluctuating between the 1.0837 and 1.0892 levels. Bulls are waiting for the right moment to make a new advance, while bears have no desire to attack.

On the 4-hour chart, the pair consolidated above the "wedge" and rose to the 50.0% Fibonacci level at 1.0862. The latest phase of the euro's growth seems ambiguous, so I am unsure of its continuation. However, sell signals are needed to expect a decline, and there are currently none. No emerging divergences were observed today, either. The growth process might continue towards the next corrective level at 61.8%–1.0959. The only factor against the euro is the overbought RSI indicator (above +80).

Commitments of Traders (COT) Report:

In the last reporting week, speculators opened 7,804 long contracts and closed 4,761 short contracts. The sentiment of the "non-commercial" group turned "bearish" several weeks ago, but now bulls have the upper hand again. The total number of long contracts speculators hold is now 178 thousand, while short contracts amount to 161 thousand. However, the situation will continue to shift in favor of the bears. The second column shows that the number of short positions has increased from 140 thousand to 161 thousand over the past three months. Long positions decreased from 202 thousand to 178 thousand during the same period. Bulls have dominated the market for too long, and now they need strong informational support to resume the "bullish" trend. A series of poor reports from the US has supported the euro, but more is needed for the long term.

News Calendar for the US and the EU:

The economic events calendar does not contain any entries on May 21. Therefore, the impact of the informational background on trader sentiment will be absent today.

Forecast for EUR/USD and Trader Recommendations:

Selling the pair was possible when quotes rebounded from the 1.0892 level on the hourly chart, with targets at 1.0837 and the lower boundary of the ascending channel. The first target has been reached. New sales are possible upon a rebound from the 1.0892 level with the same targets. Buying the euro was possible upon a rebound from the 1.0837 level on the hourly chart with a target of 1.0892. This target has been nearly reached. New purchases can be considered on a new rebound from 1.0837 or upon closing above 1.0892 with a target of 1.0982.