On Wednesday, the EUR/USD pair first rose and then declined more sharply, consolidating below the 76.4% retracement level at 1.1551. Thus, the decline may continue today toward the next retracement level of 61.8% at 1.1507. A rebound from 1.1507 would favor the euro and allow traders to expect a return to 1.1551. Consolidation below 1.1507 would increase the chances of a continued decline toward the next Fibonacci level of 50.0% at 1.1472.

The wave structure on the hourly chart remains bullish. The latest completed upward wave broke above the previous peak, while the latest downward wave has not yet broken below the previous low. All the waves are currently extremely small in size. Geopolitical developments have raised hopes for the reopening of the Strait of Hormuz, while Iran, the United States, and Oman are negotiating control over the strategically important strait. Thus, geopolitics is currently not working in the dollar's favor, while the market's hawkish expectations regarding FOMC monetary policy are easing.

The fundamental backdrop on Wednesday consisted solely of the U.S. inflation report, and it should be noted that the market's reaction to the report was rather mixed. Inflation slowed in July from 3.5% year-on-year to 3.4% year-on-year, and it is still unclear how this figure should be interpreted. Inflation has slowed, which should reduce the FOMC's willingness and inclination to tighten monetary policy in September. At the same time, however, many experts expect inflation to accelerate in August, as the geopolitical conflict in the Middle East remains unresolved, the Strait of Hormuz remains blocked, and oil prices have risen substantially again. In my view, inflation may show a neutral reading in August, without any significant increase or slowdown. However, this will not change the current situation. The Consumer Price Index will still remain at a high level. Thus, the market should not expect further disinflation or a complete abandonment by the FOMC of tighter monetary policy.

On the 4-hour chart, the pair has consolidated above the downward-sloping trend channel, suggesting not simply a bullish attack but a full-fledged bullish advance and trend. The rebound from 1.1578 allowed the bears to launch a weak attack, but a rebound from 1.1514 would give the bulls renewed strength. No new developing divergences are observed in any of the indicators. Consolidation below 1.1514 would signal a continuation of the decline.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders closed 3,128 Long positions and 17,484 Short positions. Over seven weeks in February and March, the bulls' overwhelming advantage evaporated because of the war in Iran, while over the past nineteen weeks the situation has become more balanced amid the supposed ceasefire and the market's hopes for an end to the war. The total number of Long positions held by speculators currently stands at 202,000, while the number of Short positions stands at 260,000. The bears are once again taking the lead.

Overall, over the long term, major players continue to show strong interest in the euro. Clearly, events of various kinds around the world—which have been plentiful in recent years—affect investor sentiment. In particular, the market is currently keeping a close eye on the situation in the Middle East, where the war appears to end and then starts again. The market initially ignored the ceasefire and then ignored the resumption of the war. Thus, geopolitics no longer determines the dollar's fate single-handedly.

News calendar for the United States and the European Union:

• European Union – Change in industrial production (09:00 UTC).
• United States – Producer Price Index (12:30 UTC).
• United States – Change in initial jobless claims (12:30 UTC).

On August 13, the economic calendar contains three entries, none of which I consider important. The impact of the economic backdrop on market sentiment on Thursday will be weak or nonexistent.

EUR/USD forecast and trading tips:

Buying the pair is possible today on a rebound from 1.1507 on the hourly chart, with a target of 1.1551. Sell trades were possible following an hourly close below 1.1551, with targets at 1.1507 and 1.1472. These trades can be kept open today.

The Fibonacci grids are drawn from 1.1620 to 1.1325 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.