The EUR/USD currency pair experienced a decline on Monday and Tuesday. Although the euro lost approximately 100 pips over the last two trading days of the year, it remains within the sideways range of 1.0340 to 1.0450. In the past two days, the euro has simply fallen from the upper boundary of this range to the lower boundary. It is possible for it to rebound from the lower boundary and rise back to the upper boundary. However, in the medium term, the downtrend remains intact, and it is likely just a matter of time before the 1.0340 level is breached, potentially leading to further declines toward the 1.0000 target. The fact that market participants continued to sell the euro actively even ahead of New Year's speaks volumes. No macroeconomic reports or significant fundamental events were published in either the Eurozone or the US over the last two trading days, so there is little to analyze. On Tuesday, one tradable signal was generated. During the European session, the price hovered around a critical line. However, in the early US session, it rebounded from this level and began moving downward. By the end of the day, the price had reached the 1.0340–1.0366 range, where profits could have been locked in.
The most recent Commitment of Traders (COT) report is dated December 17. As shown in the chart above, the net position of non-commercial traders has been consistently bullish, but bears have finally gained the upper hand. Two months ago, there was a significant increase in the number of short positions opened by professional traders, causing the net position to turn negative for the first time in a long while. This indicates that the euro is now being sold more frequently than it is being bought. Currently, no fundamental factors support the strengthening of the euro, and technical analysis suggests that the currency pair remains in a consolidation zone, which means it's experiencing a flat trend. In terms of the weekly timeframe, it is evident that the pair has been trading between 1.0448 and 1.1274 since December 2022. Consequently, further declines are more likely, and a break below the 1.0448 level could open up new downside opportunities for the euro. Currently, the red and blue lines on the COT chart have crossed each other, indicating a bearish market trend. During the last reporting week, the number of long positions in the non-commercial group decreased by 4,700, while short positions dropped by 14,400. As a result, the net position increased by nearly 10,000, but this does not change the overall trend.
Analysis are provided by InstaForex.
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