On Tuesday, EUR/USD reversed in favor of the euro and rose toward the 127.2% Fibonacci retracement level at 1.1220. A rebound from this level today would favor the US dollar and a resumption of the pair's decline toward the 161.8% retracement level at 1.1086. A close above 1.1220 would allow traders to anticipate a modest recovery in the euro toward the 100.0% Fibonacci level at 1.1325.
The wave structure on the hourly chart remains bearish. The latest completed upward wave failed to break above the previous high, while the new downward wave broke below the previous low. Following the FOMC meeting in September, traders expect at least one more round of monetary policy tightening before the end of the year and another next year. This factor continues to provide strong support for the US dollar, while other factors have become irrelevant. Bears remain firmly in control, which is also helping the dollar appreciate.
The news background was very weak on Tuesday, and traders paid virtually no attention to it. The only notable release during the day was the US existing home sales report, which came in slightly above market expectations. As the dollar declined throughout the day, the report had no impact on market sentiment. Christine Lagarde is scheduled to deliver two speeches today. In my view, she may emphasize the need for another round of monetary policy tightening before the end of the year. Inflation in the European Union has yet to respond to the ECB's hawkish measures, so Lagarde may highlight this ongoing problem. The ECB has only one way to address it: raising interest rates. At present, this information has little significance for the euro, as the market continues to buy the US dollar regardless of the reasons. The ECB's two rounds of monetary policy tightening have made no impression on traders. A third round is unlikely to have much of an impact either, unless bearish pressure eases.
On the 4-hour chart, despite the formation of four bullish divergences, the pair has still been unable to begin a sustained recovery. The price has once again closed below the 76.4% Fibonacci retracement level at 1.1221, suggesting a possible continuation of the decline toward the next Fibonacci level at 161.8% at 1.1088. A new close above 1.1221 would open the way for a bullish move, although its likelihood remains relatively low. The divergences on the CCI and RSI indicators have been unable to stop the bears.
Commitments of Traders (COT) Report:
During the latest reporting week, institutional traders opened 4,837 Long positions and 40,913 Short positions. Speculators currently hold a total of 243,000 Long positions and 342,000 Short positions. The bears remain in control, and the euro continues to be sold more frequently than it is bought. This is attributed to the complex geopolitical situation in the Middle East and Kevin Warsh's strong determination to bring inflation down. The market still believes that inflation will be reduced to 2% by any available means.
Overall, large market participants continue to show considerable interest in the euro over the long term. Global events of various kinds, which have been plentiful in recent years, inevitably influence investor sentiment and put pressure on risk-sensitive currencies. Furthermore, 2026 could set a record for the number of unpredictable events. Traders are therefore left with little choice but to adjust their strategies as circumstances evolve.
US and EU Economic Calendar:
EU — Speech by ECB President Christine Lagarde (02:10 UTC).EU — Speech by ECB President Christine Lagarde (08:30 UTC).US — Consumer Price Index (12:30 UTC).On October 14, the economic calendar contains three events, including the US inflation report, which deserves particular attention. Economic data may influence market sentiment during the second half of Wednesday's trading session.
EUR/USD Forecast and Trading Advice:
Buying the pair is possible following a close above 1.1220 on the hourly chart, with a target of 1.1325. Selling opportunities arose when the pair closed below 1.1220, with the 1.1081–1.1086 support level as the target. Today, short positions can be considered if the pair rebounds from 1.1220.
The Fibonacci levels are drawn from 1.1325 to 1.1712 on both the hourly and 4-hour charts.