EUR/USD
Over the past three days, the EUR/USD pair has added about 120 basis points. The current wave marking involves the construction of wave 4 as part of the downward trend section. This wave has already taken a pronounced three-wave form. However, if the news background is favorable, the whole section of the trend after May 23 can be transformed into an independent upward one. Yesterday's day for the euro could end very sad. The inflation rate in May did not even reach a rather weak forecast of 1.4% and amounted to 1.2%. Thus, the markets could well start to get rid of the euro and buy the dollar again. However, this did not happen, and in the evening, the head of the Fed Jerome Powell supported the euro in his words that in the coming months the US economy may need stimulation. In addition, Powell also drew attention to the stable values of inflation, the good state of the labor market and wages. However, no one paid attention to these words, as monetary policy and its prospects are much more important for traders.
Purchase goals:
1.1278 – 50.0% Fibonacci
1.1317 – 61.8% Fibonacci
Sales targets:
1.1106 – 0.0% Fibonacci
General conclusions and trading recommendations:
The euro/dollar pair remains within the downward trend but moved to the construction of a corrective wave. In general, the purchase is now risky, as wave 4 can be completed at any time. I recommend supporting open purchases with targets at 1.1278 and 1.1317, which is equal to 50.0% and 61.8% of Fibonacci. An unsuccessful attempt to break one of these marks or the MACD signal is down – and I recommend closing the purchases.
GBP/USD
On June 4, the pair GBP/USD gained about 35 base points, and the wave pattern still allows for several scenarios. The minimum of May 31 can still be considered as the end of the wave C. If the instrument updates the maximum of May 27 in the coming days (the peak of the expected wave 2, C), this will show the readiness of traders to build an upward set of waves. The news background remains negative for the pound, but recently the markets have started to pay less attention to the lack of positive from the UK. Traders probably decided to wait for the election of the country's new Prime Minister and find out what vector he will choose in the Brexit issue. Unexpected support for the pound may come from the US. Yesterday, Fed Chairman Powell adhered to "dovish" rhetoric, which caused the purchase of the euro. In the medium term, the pound may also feel the support of the foreign exchange market on the basis of this mood of Powell.
Sales targets:
1.2554 – 200.0% Fibonacci
1.2360 – 261.8% Fibonacci
Purchase goals:
1.3175 – 0.0% Fibonacci
General conclusions and trading recommendations:
The wave pattern of the pound/dollar tool implies a further decline of the instrument in the framework of the proposed wave C. Thus, now I recommend waiting for the breakout level to 200.0%, and selling the pound with targets located near the calculated levels of 1.2360 and 1.2176, which corresponds to 261.8% and 323.6% of Fibonacci. An unsuccessful attempt to break the level of 200.0% could lead to the completion of the construction of the downward trend section, but there is no confirmation of this hypothesis yet.
