On Wednesday, the EUR/USD pair continued to rise and consolidated above the 50.0% Fibonacci retracement level at 1.1320. As a result, the euro may continue appreciating toward the next resistance zone of 1.1374–1.1380. A consolidation below 1.1320 would favor the U.S. dollar and trigger a decline toward the support zone of 1.1260–1.1282. The bullish trend is gaining momentum once again.

The wave structure on the hourly chart is beginning to shift. The most recent upward wave broke above the previous high, while the last completed downward wave failed to break the previous low. This confirms a transition to a bullish trend. While news about successful negotiations between the U.S. and China and a hawkish Fed stance briefly supported the bears, Donald Trump's policies are once again placing heavy pressure on the U.S. dollar.

There was no significant news on Wednesday, but overall trader sentiment remains highly negative—negative toward the dollar. Although this week's economic background gave no particular reason for the dollar to fall (mainly due to the lack of data), dollar bulls still found themselves under pressure as traders resumed their buying offensive. It is likely that the dollar's modest growth last month was driven by profit-taking from earlier short positions. Since those trades were based on selling the dollar, the currency was able to show some limited recovery. But as traders received no new data or headlines suggesting that the worst was over for the U.S. economy, government, or currency, they reverted to their prior stance. The trade war continues, negotiations with many countries are stalling, and the U.S. credit rating is being downgraded.

On the 4-hour chart, the pair reversed in favor of the euro and consolidated above the 100.0% Fibonacci level at 1.1213, signaling the possible resumption of the bullish trend—also confirmed by the wave structure. Growth may continue toward the 127.2% Fibonacci retracement at 1.1495. No divergences are currently forming on any indicators.

Commitments of Traders (COT) Report:

In the last reporting week, professional traders opened 15,357 long positions and 6,302 short positions. Sentiment in the "Non-commercial" category has long been bullish—thanks to Donald Trump. The total number of long positions held by speculators now stands at 209,000, while short positions total 124,000, and the gap continues to widen. The euro remains in demand, while the dollar does not. This trend remains unchanged.

For fifteen consecutive weeks, large traders have been reducing short positions and increasing longs. Despite the widening interest rate differential between the ECB and the Fed—which still favors the U.S. dollar—Trump's policies are a much more significant factor for traders, as they could trigger a recession in the American economy. As a result, dollar bulls are unable—or unwilling—to capitalize on Fed policy.

News Calendar for the U.S. and Eurozone (May 22):

Eurozone:

• Germany Services PMI (07:30 UTC)
• Germany Manufacturing PMI (07:30 UTC)
• Eurozone Services PMI (08:00 UTC)
• Eurozone Manufacturing PMI (08:00 UTC)
• Eurozone Ifo Business Climate Index (08:00 UTC)

United States:

• Initial Jobless Claims (12:30 UTC)
• U.S. Services PMI (13:45 UTC)
• U.S. Manufacturing PMI (13:45 UTC)
• Existing Home Sales (14:00 UTC)

The economic calendar for May 22 is full of noteworthy releases, some of which may influence market sentiment throughout the day.

EUR/USD Forecast and Trader Tips:

Selling the pair is possible today on a rebound from the 1.1374–1.1380 zone on the hourly chart, with targets at 1.1320 and 1.1260–1.1282—or on a close below 1.1320. I previously recommended considering long positions on a close above 1.1265–1.1282 on the hourly chart, with targets at 1.1338 and 1.1374. The first target has already been reached, and there is no reason to close long trades just yet.

Fibonacci levels are drawn from 1.1574–1.1066 on the hourly chart and from 1.1214–1.0179 on the 4-hour chart.