The EUR/USD pair struggled to maintain support for bulls as bears continued to profit. On Thursday, the pair traded sideways, but Friday brought a renewed shift in favor of the US dollar, marking the third attempt to reach the 127.2% Fibonacci retracement level at 1.0255. A rebound from this level could favor the euro, triggering some recovery toward the resistance zone at 1.0336–1.0346, while a sustained move below 1.0255 would pave the way for further declines toward the 161.8% Fibonacci level at 1.0154.

The wave structure remains straightforward. The last completed downward wave broke the low of the previous wave, while the most recent upward wave failed to reach the last peak. This indicates that the bearish trend is firmly in place, with no signs of reversal. For the trend to shift, the euro would need to see a confident rise above 1.0460 and close above it within the current wave.

The fundamental backdrop on Thursday offered little to support the euro. The final German CPI matched initial estimates, and US retail sales fell just 0.2% short of traders' expectations. Although this led to a slight drop in the US dollar during the afternoon, bears quickly regained control. The Philadelphia Fed Manufacturing Index posted an impressive 44.3 points, far surpassing the forecast of -5. Summing up, there was little reason for bears to retreat. While one US report disappointed, recent data has been largely positive, suggesting that the Federal Reserve is unlikely to ease monetary policy in the coming months. This strengthens the dollar's position and diminishes the likelihood of a trend reversal from bearish to bullish.

On the 4-hour chart, the pair retraced to the 1.0332 level and bounced back. The pair remains within a descending trend channel, signaling continued bearish sentiment among traders. A further decline toward 1.0110 seems likely unless the pair breaks out above the channel. No divergences are visible across indicators to suggest a reversal, and a strong euro rally is unlikely without a breakout above the channel.

Commitments of Traders (COT) Report

The latest COT report revealed a net bearish sentiment. Over the past week, speculators added 9,335 long positions and 10,392 short positions, reinforcing the bearish outlook for EUR/USD. Long positions now total 168,000, while short positions amount to 238,000.

For the 16th consecutive week, major players have reduced their euro holdings, underscoring the ongoing bearish trend. While bulls occasionally dominate during specific weeks, this is more the exception than the rule. The key factor behind the dollar's strength—the expectation of monetary policy tightening by the Federal Reserve—has already been priced in. While there may be future catalysts for dollar weakness, the current trend favors further strengthening of the US currency.

Economic Calendar for January 17

• Eurozone: Consumer Price Index (10:00 UTC)
• US: Building Permits (13:30 UTC)
• US: Housing Starts (13:30 UTC)
• US: Industrial Production (14:15 UTC)

While today's calendar includes several noteworthy events, none are expected to have a strong market impact.

EUR/USD Forecast and Trading Advice

Selling opportunities arose from a rejection of the 1.0336–1.0346 zone on the hourly chart, with targets set at 1.0255 and 1.0154. These trades remain valid, and Stop Loss can be adjusted to break even. The pair has nearly reached the first target twice already. Buying opportunities may present themselves following a rebound from 1.0154 and 1.0110 or if the pair closes above the 1.0336–1.0346 zone.

The Fibonacci retracement levels used are based on the 1.0336–1.0630 range on the hourly chart and the 1.0603–1.1214 range on the 4-hour chart.