On Thursday, the EUR/USD pair bounced off the 1.0435 level and reversed in favor of the U.S. dollar, falling towards the 50.0% Fibonacci retracement level at 1.0373. A break below this level would confirm a continuation of the decline towards the next support levels at 1.0335 and 1.0288. However, a rebound from 1.0373 on Friday could support the euro's recovery, targeting 1.0435 and 1.0458.

The hourly chart presents an unclear wave structure. The last completed upward wave broke the previous peak. The last downward wave broke the lows of the two preceding waves.

This raises doubts about the current trend direction. The market could be shifting into a bearish trend, or we might be seeing a complex sideways movement. Additionally, the latest waves vary significantly in size, making the overall trend harder to define.

On Thursday, the fundamental backdrop was weak for the euro, allowing bearish traders to maintain control. Eurozone retail sales fell by 0.2% in December, while traders expected a -0.1% decline (m/m). Annual retail sales growth was 1.9%, matching forecasts. U.S. initial jobless claims were in line with expectations and had little market impact.

Thus, while bears received some fundamental support, the key market-moving events are still ahead.

Key Focus Today: Nonfarm Payrolls (NFP) and U.S. unemployment rate

These reports could significantly impact market sentiment and influence traders' stance on the dollar. NFP is forecasted to decline compared to the previous month, while the unemployment rate remains at 4.1%. However, actual data often deviates from forecasts, which can create unexpected market volatility.

On the 4-hour chart, the EUR/USD pair previously rallied towards the 127.2% Fibonacci retracement level at 1.0436 but failed to break above it, leading to a reversal in favor of the dollar. This suggests a potential return to the 161.8% Fibonacci level at 1.0225.

For bulls to regain control, a strong fundamental catalyst is needed to push the price above 1.0436. No divergences were detected across major technical indicators today.

Commitments of Traders (COT) Report

The latest COT report shows that large institutional traders remain bearish on the euro. Professional traders closed 14,005 long positions and 9,887 short positions. The total number of long positions stands at 153,000, while short positions increased to 220,000.

Major traders have been selling the euro for 19 consecutive weeks. The prevailing trend remains bearish, with occasional bullish dominance only on short-term moves. The primary reason for dollar weakness—expectations of Fed rate cuts—has already been priced in. Without new catalysts, the dollar's upside remains more likely. Technical analysis also supports the continuation of the long-term bearish trend.

News calendar for the USA and the European Union:

• European Union – Change in industrial production in Germany (07-00 UTC).
• USA – Change in the number of employed Nonfarm Payrolls (13-30 UTC).
• USA – Unemployment rate (13-30 UTC).
• USA – Change in the average hourly wage (13-30 UTC).
• USA – University of Michigan Consumer Confidence Index (15-00 UTC).

Today's economic calendar is packed with major releases. High volatility is expected, especially in the second half of the trading day.

EUR/USD Forecast & Trading Recommendations

Selling opportunities were available yesterday after price rejection at 1.0435 and 1.0436 (on both hourly and 4H charts). The target zone of 1.0335–1.0346 was nearly reached. Today's selling positions can be held at least until the release of U.S. economic reports. Buying opportunities may arise in the 1.0335–1.0346 zone, depending on price action and market reaction.

Fibonacci Levels:

• Hourly Chart: Key levels built from 1.0533 to 1.0213.
• 4-Hour Chart: Levels built from 1.0603 to 1.1214.