Forex Analysis & Reviews: 02.01.2025 - EUR/USD. January 2nd. Bears...

02.01.2025 01:21 PM

EUR/USD. January 2nd. Bears Face Strong Support Again

The EUR/USD pair on Tuesday returned to the 1.0420 level and rebounded from it. A reversal in favor of the US dollar occurred, and a new decline toward the 423.6% corrective level at 1.0320 began. However, the movement stopped for the third time near the 1.0346 level. I believe it is worth considering the support zone of 1.0320–1.0346 instead of just 1.0320. Breaking below this zone would open the path for further euro depreciation.

The wave situation remains clear. The last completed upward wave slightly broke the peak of the previous wave, while the last downward wave easily broke the previous low. Thus, a new bearish trend is forming, with no signs of completion. For these signs to appear, the euro must show a confident rise above the 1.0460 level.

There was no background information on Tuesday. Over the past few days, bears have shown a desire to resume the decline. They now need to break through the 1.0320–1.0346 zone mentioned earlier. When they might successfully break below this zone with a close beneath it remains unclear, as while the holidays are over, the festive mood lingers. The market might need some time to return to its usual rhythm. Today, several economic reports are expected from the EU, Germany, and the US, but they must support the dollar for bears to make another attempt to close below the 1.0320–1.0346 zone.

On the 4-hour chart, the pair has rebounded twice from the 127.2% corrective level at 1.0436. Thus, the decline could resume toward the Fibonacci 161.8% level at 1.0225. A consolidation above 1.0436 would open the potential for growth toward the upper boundary of the downward trend channel. There are no emerging divergences on any indicator. The trend channel does not provide reasons to expect significant euro growth.

Commitments of Traders (COT) Report:

Over the last reporting week, speculators closed 4,704 long positions and 14,382 short positions. The sentiment in the "Non-commercial" group remains bearish and is strengthening, indicating a further decline for the pair. The total number of long positions held by speculators is now 152,000, while short positions amount to 218,000.

For fourteen consecutive weeks, major players have been reducing their euro holdings, signaling a bearish trend. Occasionally, bulls dominate within individual weeks, but this is more of an exception. The primary factor driving the dollar's decline—expectations of a Federal Open Market Committee (FOMC) policy shift—has already been priced in. There are no longer reasons for massive dollar selling. While these factors may arise over time, the US dollar's growth remains more probable. Graphical analysis also supports the continuation of the long-term bearish trend. Thus, I expect a prolonged decline for the EUR/USD pair.

Economic Calendar for the US and Eurozone:

Eurozone: Germany Manufacturing PMI (08:55 UTC)
Eurozone: Eurozone Manufacturing PMI (09:00 UTC)
US: Initial Jobless Claims (13:30 UTC)
US: Manufacturing PMI (14:45 UTC)

The economic calendar for January 2nd contains four entries, none of which are highly significant. The influence of the information background on market sentiment today will likely be weak.

Forecast for EUR/USD and Trading Tips:

Selling the pair was possible after a rebound on the 4-hour chart from the 1.0436 level, targeting the 1.0320–1.0346 zone on the hourly chart. New sales are possible after a close below the 1.0320–1.0346 zone, targeting 1.0225.
Buying is possible after a rebound from the 1.0320–1.0346 zone, with targets at 1.0420 and 1.0460. However, buying cannot be a priority in a bearish trend.

Fibonacci Levels:

Built on 1.1003–1.1214 for the hourly chart.
Built on 1.0603–1.1214 for the 4-hour chart.

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