On Tuesday, EUR/USD continued its gradual decline after consolidating below the 76.4% Fibonacci level at 1.1551. At the pace seen during the first two trading days, the decline toward the 61.8% retracement level at 1.1507 could continue for another two weeks. However, there is a chance that traders will become more active today. Consolidation above 1.1551 would favor the euro and the resumption of the upward move seen in recent weeks toward the 100.0% retracement level at 1.1620.

The wave structure on the hourly chart remains "bullish." The latest completed downward wave broke the previous low, but the latest upward wave also broke the previous high. Geopolitical developments have raised hopes that the Strait of Hormuz will reopen, while Iran, the United States, and Oman are holding talks on control of 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.

There was no significant news background on Tuesday. Traders showed absolutely no interest in the weekly ADP report or existing home sales, which does not surprise me at all. Today, the U.S. inflation report will be released, and it will determine the dollar's fate this week. Let me remind you that last Friday's weak Nonfarm Payrolls report significantly reduced the already low chances of FOMC monetary policy tightening in September. The inflation report could reduce those chances even further or even eliminate them entirely. However, if inflation unexpectedly accelerates in July, this could strengthen the bears, as the chances of an interest rate hike by the end of the year would become high again. Regardless of the state of the labor market, Kevin Warsh has already declared his intention to address the legacy of Jerome Powell and Joe Biden, who allowed inflation to remain elevated for five years. Whether the Warsh team will move toward tighter policy is now almost a philosophical question. If not, Warsh will have to publicly explain why the Committee is refusing to raise rates if inflation is twice the target level.

On the 4-hour chart, the pair has consolidated above the downward trend channel, suggesting not merely a "bullish" attack but a full-fledged "bullish" advance and trend. The rebound from 1.1578 allowed the bears to launch a gradual attack, but a rebound from 1.1514 would once again strengthen the bulls. No emerging divergences are currently observed in any of the indicators.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders closed 3,128 Long positions and 17,484 Short positions. Over the 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 apparent ceasefire and market hopes that the war would end. 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, large market participants continue to show considerable interest in the euro. Certainly, events of various kinds around the world, which have been abundant 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 resume again. The market initially ignored the ceasefire and then ignored the resumption of the war. Thus, geopolitics no longer determines the dollar's fate on its own.

News calendar for the United States and the European Union:

• Germany – Consumer Price Index (06:00 UTC).
• United States – Consumer Price Index (12:30 UTC).

On August 12, the economic calendar contains two events, one of which is extremely important. The economic background could have a strong impact on market sentiment during the second half of Wednesday.

EUR/USD Forecast and Trading Tips:

Long positions can be considered today if the pair consolidates above 1.1551 on the hourly chart, with a target of 1.1620. Short positions were possible following a close below 1.1551 on the hourly chart, with targets at 1.1507 and 1.1472. These trades can be kept open today.

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