In the 4H time frame, the wave picture of the Euro-Dollar pair has undergone some minor changes. Last week, the quotes skyrocketed, so the wave e within C was completed. Its size was nearly the same as the previous wave d within C. Consequently, the current upward wave can turn out to be either D or 1. In the first case, the euro's bullish run may already be finished. As clearly seen in the chart, the corrective wave B is short. The wave D can turn out to be the same. A failed attempt to break the level of 1.1455 which is 76.4% Fibo can be the second one in the last two weeks and push the quotes farther from the recent highs. In such a case, the current wave may become completed. So, the wave picture signals downward bias. Depending on the bias strength, it will be easier to find out what wave is being formed. The current decline is weak with a sluggish news background. The expected wave D can be composed of three waves, but it is an optional variant.
Market in anticipation of the US inflation data
On Wednesday, February 9th, the EUR/USD pair added 10 pips, moving within the range of 10 pips as well. So, the market activity remained weak. There was a lack of important news so no conclusions can be done. We have to wait until Thursday when some reports will be released. Thus, the US CPI report for January will come under the spotlight. The consensus forecast calls for an increase to 7.3%. The core inflation is expected to rise to 5.9% y/y. If the actual readings meet expectations, the demand for the American currency may increase. Besides, ECB Deputy Governor Luis de Guindos and ECB Chief Economist Philip Lane will provide their views tomorrow. Their speeches are unlikely to cause any strong reaction, but the officials may drop a hint on the regulator's plans for the interest rate this year. After the previous ECB meeting, when Christine Lagarde made no loud statements, a rate hike became more likely. Still, the possibility is low. Probably, Luis de Guindos or Philip Lane will provide more certainty regarding this issue. Additionally, the European Commission will release the economic report that is published three times a year. This report usually has a minor impact on the market. However, crucial changes to the outlook may signal that the monetary policy is also likely to undergo changes. The European currency strongly needs such changes. Otherwise, it will be unable to maintain bullish momentum. At the same time, the outlook for the key economic indicators may be of interest to market participants.
General conclusion
Based on the above analysis, I can conclude that the formation of the upward wave C is completed. Moreover, the wave D looks to be complete as well. If so, the time is ripe to sell the European currency. The possible target lies at 1.1314. Another upward wave can form within the wave D. If the current wave does not develop into the wave D but turns out to be the wave 1 within a new rising trend segment, there will be a high chance of the new wave going above the high of February 4th. So, the optimal strategy, for the time being, is to sell cautiously and be prepared to go long again.
As seen in the bigger time frame, the expected wave D is being formed. This wave can be either short or of a three-wave structure. Given that the previous waves were not long and of similar sizes, we can expect this wave to be the same. There is every reason to suggest that the wave D is already completed. However, we need to wait for further price movements to confirm this suggestion.
