On Thursday, EUR/USD posted a modest gain and consolidated above the 127.2% Fibonacci retracement level at 1.1220. However, this has not improved the outlook for the euro. The pair may consolidate below 1.1220 as early as today, which would open the way for a renewed decline toward the 1.1081–1.1086 support level. The bulls are currently so weak that they cannot even break above the nearest peak. Without such a breakout, a reversal of the bearish trend is impossible.
The wave structure on the hourly chart remains bearish. The last completed downward wave failed to break below the previous low, while the new upward wave has not yet broken above the previous peak. Following the September FOMC meeting, traders expect at least one more monetary policy tightening before the end of the year and another next year. This factor continues to provide exceptionally strong support for the US dollar, while other factors have little significance. The bears have gained momentum, which is also helping the dollar appreciate.
There was virtually no significant news on Thursday, as was the case during most of the current week. The euro failed to capitalize on the opportunities available last week and the week before, while the bears had little to work with this week. It is worth recalling that the ECB has already tightened monetary policy twice, and the latest inflation report leaves room for a third round of tightening before the end of the year. A week earlier, the United States released extremely weak unemployment and labor market reports. The bulls had at least three excellent opportunities to go on the offensive but failed to take advantage of them. Therefore, given current market sentiment, the euro is likely to continue declining. Looking at the news flow alone, such a forecast is extremely difficult to make. However, given current market conditions, another decline appears entirely consistent with the prevailing trend. The University of Michigan Consumer Sentiment Index will be released in the United States today, but it is unlikely to fundamentally change trader sentiment, which remains firmly bearish.
On the 4-hour chart, after forming three bullish divergences, the pair eventually reversed in favor of the euro and consolidated above the 127.2% Fibonacci retracement level at 1.1221. However, the upward movement remains extremely sluggish. The bears could launch another attack at any time, as they are facing virtually no resistance from the bulls. Consolidation below 1.1221 would signal a likely resumption of the decline toward 1.1088.
During the latest reporting week, professional traders opened 17,475 Long positions and 28,397 Short positions. Speculators currently hold a total of 238,000 Long positions and 301,000 Short positions. The bears remain in control, and the euro continues to be sold more frequently than it is bought. This reflects the complex geopolitical situation in the Middle East and Kevin Warsh's firm commitment to bringing inflation down. The market continues to believe that inflation will be reduced to 2% by any available means.
Overall, major market participants continue to show considerable interest in the euro over the long term. Global events of various kinds, which have been particularly numerous in recent years, influence investor sentiment and put pressure on risk-sensitive currencies. Moreover, 2026 could set a record for the number of unforeseen events. As a result, traders have little choice but to adjust their strategies as circumstances evolve.
On October 9, the economic calendar contains only one low-importance release. The impact of economic data on market sentiment on Friday is expected to be very limited or nonexistent.
Buying the pair was possible following a close above 1.1220 on the hourly chart, with a target of 1.1325. Selling is possible if the pair consolidates below 1.1220, with the 1.1081–1.1086 support level as the target.
The Fibonacci retracement levels are drawn from 1.1325 to 1.1712 on both the hourly and 4-hour charts.
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