On Monday, the EUR/USD pair reversed in favor of the euro and returned for the third time to the resistance zone of 1.1265–1.1282. A new rebound from this zone did not lead to any activation from the bears, who apparently considered their job done around the 1.1081 level. Despite the lack of important data on Monday, the bulls attacked as if Donald Trump had imposed new tariffs or fired Jerome Powell. Another rebound from the 1.1265–1.1282 zone could once again trigger a decline toward the 127.2% Fibonacci level at 1.1181, while a breakout above this zone would increase the likelihood of continued growth toward the 76.4% corrective level at 1.1338.

The wave situation on the hourly chart is beginning to change. The most recent completed upward wave did not break above the previous high, and the most recent downward wave failed to break the previous low. Thus, the trend currently remains "bearish." News of successful negotiations between the U.S. and China, along with the Fed's "hawkish" stance, supported the bears—but only briefly. Bulls are now attempting to reverse the trend again, and the outcome depends on the 1.1265–1.1282 zone.

The news background on Monday was very weak, dull, and unremarkable. The Eurozone's final Consumer Price Index for April came in at 2.2%, which had no impact on market sentiment. I'd like to remind you that falling inflation allows the ECB to continue monetary policy easing, although the ECB is currently inclined to ease policy even without a slowdown in inflation. Europe is highly concerned that the trade war could cause a significant economic slowdown, so there is a push to lower interest rates as much as possible to create more favorable financing conditions. The euro should typically react to such information with a decline, but the dollar currently doesn't have the "growth" option. Globally, traders continue to factor in the trade war, which is expected to slow down the U.S. economy. As a result, bulls are ready to stage attacks regularly, even in the absence of an obvious news driver.

On the 4-hour chart, the pair reversed in favor of the euro and consolidated above the 100.0% Fibonacci level at 1.1213, which, along with the wave structure, signals a possible trend reversal. The upward movement may continue toward the 127.2% corrective level at 1.1495, indicating the renewal of a "bullish" trend. No emerging divergences are currently observed on any indicators. It is now much easier to expect a continuation of the bullish trend than the start of a bearish one.

Commitments of Traders (COT) Report:

During the last reporting week, professional traders opened 15,357 long positions and 6,302 short positions. The sentiment of the "Non-commercial" group has long since returned to "bullish"—thanks to Donald Trump. The total number of long positions held by speculators now stands at 209,000, while short positions are at 124,000, and the gap continues to widen. Thus, demand for the euro remains high, while the dollar is not in demand. This situation remains unchanged.

For fifteen consecutive weeks, large traders have been reducing short positions and increasing long positions. The divergence in monetary policy approaches between the ECB and the Fed still favors the U.S. dollar due to the widening interest rate differential. However, Donald Trump's policies are a more significant factor for traders, as they may trigger a recession in the U.S. economy. Consequently, dollar bulls are neither able nor willing to benefit from the Fed's policies.

News Calendar for the U.S. and the Eurozone:

On May 20, the economic calendar contains no noteworthy entries. The news background will not influence market sentiment on Tuesday.

EUR/USD Forecast and Trader Recommendations:

Selling the pair is possible today in the event of a bounce from the 1.1265–1.1282 zone on the hourly chart, with targets at 1.1181 and 1.1074–1.1081. Buying can be considered if the hourly close is above the 1.1265–1.1282 zone, with targets at 1.1338 and 1.1374.

Fibonacci level grids are built from 1.1265 to 1.1574 on the hourly chart and from 1.1214 to 1.0179 on the 4-hour chart.