On Thursday, the EUR/USD pair rebounded from the 38.2% Fibonacci retracement level at 1.1438, reversed in favor of the euro, and resumed its advance, consolidating above the 61.8% Fibonacci level at 1.1507. As a result, the euro gained approximately 150 points in just two days. Today, another rebound from the 1.1507 level would allow bulls to continue their advance toward the 76.4% Fibonacci retracement level at 1.1551. A consolidation below 1.1507 would favor the U.S. dollar and open the way for a decline toward the 50.0% Fibonacci level at 1.1472.

The wave structure on the hourly chart has turned bullish. Although the most recently completed downward wave broke below the previous low, the latest upward wave also surpassed the previous high. The geopolitical situation remains tense as Iran and the United States continue their blockade of the Strait of Hormuz, while negotiations are currently not taking place. Traders had been expecting support from the Federal Reserve for about a month, but those expectations were not met following Wednesday's meeting. After a prolonged pause, bulls have regained the initiative.

Thursday's news flow once again favored the euro, although it should be viewed together with Wednesday's developments. During the morning session, traders continued to digest the outcome of the FOMC meeting, which remained open to different interpretations. This time, however, the market viewed the outcome as insufficiently hawkish. Kevin Warsh continued to avoid giving a clear signal, leaving markets unconvinced that further monetary tightening was inevitable. On the contrary, his remarks allowed investors to question whether the Federal Reserve still viewed higher interest rates as the primary tool for combating inflation. Once the market had fully priced in the FOMC meeting, a series of economic releases further supported the euro. The eurozone reported stronger-than-expected GDP growth, Germany also posted solid GDP figures, U.S. GDP came in below forecasts, German inflation exceeded market expectations, while the eurozone unemployment rate remained unchanged. Four of these five reports supported the bullish outlook. As a result, the euro recorded strong gains over the course of just 24 hours, allowing bulls to regain control of the market.

On the 4-hour chart, the pair has consolidated above the descending trend channel, suggesting not merely a bullish rebound but the potential beginning of a sustained upward trend. Consolidation above the 76.4% Fibonacci level at 1.1514 supports the case for further gains toward 1.1578. No developing divergences are currently visible on any of the technical indicators.

Commitments of Traders (COT) Report

During the latest reporting week, institutional traders closed 9,842 long positions and opened 18,891 short positions. Over the seven weeks spanning February and March, bulls lost their overwhelming advantage as a result of the conflict involving Iran. During the past seventeen weeks, however, positioning has become more balanced amid the temporary ceasefire and market hopes for an end to the conflict. Non-commercial traders currently hold 220,000 long positions and 261,000 short positions. Bears have once again regained the upper hand.

Despite this, over the longer term, large institutional investors continue to show considerable interest in the euro. Recent years have demonstrated that global events of various kinds continue to shape investor sentiment. At present, market participants remain focused on developments in the Middle East, where the conflict repeatedly escalates after periods of relative calm. The market initially ignored the ceasefire and later paid little attention to the renewed hostilities. As a result, geopolitical developments are no longer the sole factor determining the direction of the U.S. dollar.

Economic Calendar

Germany

• Unemployment Rate (07:55 UTC)

Eurozone

• Consumer Price Index (09:00 UTC)

The economic calendar for July 31 includes two scheduled releases, with the eurozone inflation report being the key event. Economic data may once again have a significant impact on market sentiment on Friday.

EUR/USD Forecast and Trading Tips

Long positions became valid after the rebound from 1.1438 on the hourly chart, with targets at 1.1472 and 1.1507. Both targets have been reached. Today, long positions may be maintained with upward targets at 1.1551 and 1.1620. Short positions may be considered if the pair consolidates below 1.1507 on the hourly chart, with downward targets at 1.1472 and 1.1438.

The Fibonacci retracement levels are plotted from 1.1620 to 1.1325 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.