The EUR/USD pair continued to decline on Friday and consolidated below the 100.0% retracement level at 1.1620. Thus, the decline of the European currency may continue toward the next Fibonacci level of 76.4% at 1.1551. A rebound from this level would favor the euro and some upward movement toward 1.1620. Consolidation below 1.1551 would increase the likelihood of further decline toward the 61.8% retracement level at 1.1507.

The wave situation on the hourly chart remains bullish. The latest completed upward wave broke above the previous peak, while the new downward wave has not yet broken below the previous low. Geopolitical conditions remain consistently negative: negotiations between Iran and the United States are not taking place, and the blockade of the Strait of Hormuz remains in place. However, the FOMC's stance is currently more important for the dollar, and it remains highly contradictory.

The fundamental backdrop on Friday supported the bears. However, I cannot say that it was unequivocally favorable to the bears. We should start with Kevin Warsh's speech, in which he confirmed that the FOMC intends to work on inflation, which implies monetary policy tightening in the very near term. As a reminder, in August, Brent crude oil prices returned above $90 per barrel, so an acceleration in inflation should be expected based on the results of this month. Germany's August inflation report will be released today, while the European Union's report will be released tomorrow. Most likely, we will see higher figures than a month earlier. This means that inflation in the United States will most likely also increase. As a result, the Fed may raise its interest rate as early as September, although this had previously been considered unlikely. Traders expected Kevin Warsh to address not only inflation but also the weak labor market. However, the FOMC president did not mention the labor market at all, which further strengthened the market's belief that the key objective is to reduce inflation. Against the backdrop of the Fed's hawkish stance, the bears went on the offensive, but the trend remains bullish for now.

On the 4-hour chart, the pair continues to decline and has consolidated below the upward trend channel. Consolidation below the 50.0% Fibonacci level at 1.1588 will allow traders to expect a continuation of the decline toward the next retracement level of 38.2% at 1.1526. A rebound from 1.1588 would favor the euro and some upward movement toward 1.1649. No emerging divergences are currently observed in any of the indicators.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 2,678 Long positions and closed 20,058 Short positions. Over the seven weeks in February and March, the bulls' total advantage evaporated because of the war in Iran, while over the past twenty-two weeks the situation has evened out amid the supposed ceasefire and market hopes for an end to the war. The total number of Long positions currently held by speculators stands at 198,000, while the number of Short positions stands at 235,000. The bears remain in the lead, but their advantage is shrinking rapidly.

Overall, over the long term, large market participants continue to show strong interest in the euro. Undoubtedly, events of various kinds around the world, which have been plentiful 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 alternately appears to end and then resume. However, 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 (12:00 UTC).

On August 31, the economic events calendar contains one entry, which I do not consider important. The impact of the fundamental backdrop on market sentiment on Monday will be weak or absent.

EUR/USD Forecast and Trading Tips:

Buying the pair today is possible on a rebound from 1.1551 on the hourly chart, with a target of 1.1620. Sell trades were possible on a rebound from 1.1700 on the hourly chart, with a target of 1.1620. Consolidation below 1.1620 allows traders to hold positions with a target of 1.1551.

The Fibonacci levels are drawn from 1.1620–1.1325 on the hourly chart and from 1.1849–1.1325 on the 4-hour chart.