FX.co ★ EUR/USD. March 25th. The bears came across a strong support zone

On Friday, the EUR/USD pair continued its downward trend towards the corrective level of 23.6%–1.0801. Just below this level lies the support zone of 1.0785–1.0797. Together, they form a strong support zone that bears will find challenging to overcome.

Consolidation below this zone will increase the likelihood of further decline towards the Fibonacci level of 0.0%–1.0696. A rebound from the zone will favor the euro currency and lead to some growth towards the corrective level of 38.2%–1.0866.

The wave situation remains quite clear. The last completed upward wave failed to break the peak of the previous wave (from March 8), but the next downward wave broke the low of the previous wave (from March 19). Thus, we are currently dealing with a bearish trend, and there is no sign of its completion. For such a sign to appear, the new upward wave must break the current last peak (from March 21). Until then, I expect the decline in quotes to continue.

There was no significant news on Friday. Nevertheless, bear traders found new grounds for attack. Even though there was no news on Friday, there had been enough over the previous four days. Therefore, traders had enough reasons to trade actively. I want to remind you that on Wednesday evening, the FOMC announced the results of its meeting, which, in my opinion, can be considered positive for the dollar. Jerome Powell and the entire FOMC did not soften their rhetoric or discuss the need to lower rates soon. Instead, they expressed enough concerns about the weak inflation slowdown, which could compel the Fed to continue holding rates at their current level. Thus, last week and particularly on Friday, traders had much more reasons to sell the pair than to buy.

On the 4-hour chart, the pair reversed in favor of the US dollar after forming a bearish divergence on the CCI indicator. They resumed their decline, closing below the Fibonacci level of 50.0%-1.0862. Thus, the decline in quotes may now continue towards the next correction level of 38.2%-1.0765. No new emerging divergences were observed today for any indicator. Consolidation below the ascending trend corridor indicates the end of the bullish trend.

Commitments of Traders (COT) report:

During the last reporting week, speculators closed 11,616 long contracts and opened 14,449 short contracts. The sentiment of the "non-commercial" group remains bullish but continues to weaken. The total number of long contracts held by speculators now stands at 182,000, while short contracts amount to 134,000. The situation will continue to change in favor of bears. The second column shows that the number of short positions has increased from 83,000 to 134,000 over the past 2.5 months. During the same period, long positions decreased from 235,000 to 182,000. Bulls have dominated the market for too long, and now they need a strong information background to resume the bullish trend. I don't see such a perspective soon.

News Calendar for the US and the European Union:

European Union – Speech by ECB President Christine Lagarde (10:00 UTC).

US – New Home Sales (14:00 UTC).

On March 25, the economic events calendar includes a speech by Christine Lagarde. The impact of the information background on traders' sentiment today may be of moderate strength.

Forecast for EUR/USD and trading recommendations:

Sales of the pair were possible upon closing on the hourly chart below the level of 1.0918, with targets at 1.0866 and 1.0801. Both targets have been reached. New sales are possible upon closing below the zone of 1.0785–1.0801 with a target of 1.0696. Purchases of the pair are possible today upon rebound from the zone of 1.0785–1.0801 on the hourly chart with targets at 1.0866 and 1.0918.