On Tuesday, EUR/USD reversed in favor of the European currency and consolidated above the 127.2% corrective level at 1.1220, followed by a return to this level on Wednesday morning. Thus, a rebound from 1.1220 today would favor the European currency and a resumption of growth toward the 100.0% corrective level at 1.1325. Consolidation below 1.1220 would allow traders to expect further decline toward the 1.1081–1.1086 support level.

The wave situation on the hourly chart remains bearish. The latest completed downward wave broke the previous low, while the new upward wave failed to break the previous peak. Following the September FOMC meeting, traders expect at least one more monetary policy tightening by the end of the year and another one next year. This factor continues to provide strong support for the US currency.

There was virtually no significant news background on Tuesday, and the situation will not improve today. Bullish traders found the strength to launch a counterattack, but they now need to hold at least above 1.1220. If the bears prevail again, the euro's decline will resume. I have already mentioned in my previous articles that the strength of the dollar at present raises certain questions. Nothing has changed so far. The dollar continues to rise steadily overall, although the Fed has effectively paused its monetary policy tightening, at least until December. The Fed's rate hikes (the September hike and the expected future hike) were the main factor behind the US currency's rise over the past month. I also cannot say that the geopolitical factor is responsible for the sharp decline in EUR/USD. A war for the liberation of Yemen from the Houthi group has begun, but this is a local war within a single country. At present, it does not pose risks to shipping in the Red Sea or through the Bab el-Mandeb Strait. Geopolitical risks certainly remain high, but at the same time, it is necessary to closely monitor their outlook and the actual threats they pose to individual economies, including the global economy.

On the 4-hour chart, after forming three bullish divergences, the pair eventually reversed in favor of the euro and consolidated above the 127.2% corrective level at 1.1221. Thus, the rise may continue toward the next Fibonacci level of 100.0% at 1.1325. The 1.1220 level is currently of great importance for the euro.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 17,475 Long positions and 28,397 Short positions. The total number of Long positions held by speculators currently stands at 238,000, while the number of Short positions stands at 301,000. The bears remain in control, and the European currency continues to be sold more often than bought, which is attributed to the difficult geopolitical situation in the Middle East and Kevin Warsh's strong determination to bring inflation down. The market currently believes that inflation will be reduced to 2% by any available means.

Overall, over the long term, major players continue to show strong interest in the euro. Certainly, events of various kinds around the world, of which there has been no shortage in recent years, influence investor sentiment and put pressure on risk-sensitive currencies. And 2026 may become a record year in terms of the number of events that could not have been predicted in advance. Therefore, traders have no choice but to adjust their strategies as events unfold.

News Calendar for the United States and the European Union:

• Germany – Change in industrial production (06:00 UTC).
• United States – FOMC meeting minutes (18:00 UTC).

On October 7, the economic calendar contains two entries, neither of which I would consider important. The economic news background will have no impact on market sentiment on Wednesday.

EUR/USD Forecast and Trading Tips:

Buying the pair is possible today following a rebound from 1.1220 on the hourly chart, with a target of 1.1325. Selling is possible following consolidation below 1.1220, with the target at the 1.1081–1.1086 support level.

Fibonacci levels are plotted from 1.1325–1.1712 on the hourly chart and from 1.1325–1.1712 on the 4-hour chart.