Forex Analysis & Reviews: 06.05.2025 - EUR/USD. May 6th. Bears Did...

06.05.2025 10:30 AM

EUR/USD. May 6th. Bears Did All They Could

On Monday, the EUR/USD pair made a new reversal in favor of the U.S. dollar, but this time the decline was even weaker. For most of last week, bears launched sluggish attacks, as they were countered by a negative information backdrop from the U.S. Most reports showed worsening conditions in the American economy, making it very difficult for the dollar to show growth. I do not expect the pair to drop below the 100.0% corrective level at 1.1265 in the near future.

The wave structure on the hourly chart is shifting. The last completed upward wave broke the previous wave's peak, while the new downward wave did not break the prior low. Thus, the waves currently indicate that the "bullish" trend is intact. Donald Trump has not introduced any new tariffs for several weeks, which has led traders to stop selling the dollar. Recently, there have been reports of possible tariff reductions for several countries, including China. This information may support the bears, but it is too weak to trigger a strong offensive.

Monday's news background did all it could for the U.S. dollar—and the bears did all they could as well. There is no talk of strong growth for the American currency at this point, nor for the U.S. economy and its key indicators. However, yesterday the ISM Services PMI turned out better than expected, coming in at 51.6 versus a forecast of 50.6. As a result, the bears managed a small offensive but failed to close below the critical level of 1.1265. This is likely how traders will continue to operate for the time being. The dollar will rise sluggishly and with difficulty, while bull attacks may look lively and smooth. Today's information background is expected to be rather weak, so I do not expect active trading. Most likely, the pair will continue fluctuating between 1.1265 and 1.1374.

On the 4-hour chart, the pair fell toward the ascending trendline. A bounce from this line will work in favor of the euro and a renewed rise toward the 127.2% corrective level at 1.1495. A consolidation below the trendline will open the way for a continued decline toward the next Fibonacci level of 100.0% at 1.1213. However, for the dollar to grow, more than just chart signals are needed—strong news is required. At present, no emerging divergences are seen on any indicators.

Commitments of Traders (COT) Report:

Over the past reporting week, professional players opened 183 Long positions and closed 10,586 Short positions. The sentiment of the "Non-commercial" group has long since turned "bullish"—thanks to Donald Trump. The total number of Long positions held by speculators now stands at 196,000, compared to 120,000 Short positions. Just a few months ago, the situation was the opposite, with no signs of trouble on the horizon.

For twenty weeks, large players were reducing their euro holdings, but for the last twelve weeks, they have been reducing their Short positions and increasing their Long ones. The divergence in monetary policy approaches between the ECB and the Fed still favors the U.S. dollar due to the rate differential. However, Donald Trump's policies are a more significant factor for traders, as they could push the FOMC toward a more dovish stance and potentially trigger a U.S. recession.

News Calendar for the U.S. and Eurozone:

Eurozone – Germany Services PMI (07:55 UTC) Eurozone – Services PMI (08:00 UTC)

On May 6, the economic calendar includes two entries, which cannot currently be considered even "moderately" important. The information background is unlikely to impact market sentiment on Tuesday. News on tariffs remains the market's main driver.

EUR/USD Forecast and Trader Tips:

Sales of the pair are possible after a new rebound from the 1.1374 level on the hourly chart with a target of 1.1265. Buying can be considered after a rebound from 1.1265 with a target of 1.1374.

The Fibonacci grids are drawn from 1.1265–1.1574 on the hourly chart and from 1.1214–1.0179 on the 4-hour chart.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.