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Forex Analysis:::2022-09-29T14:16:28

EUR/USD analysis on September 29. Christine Lagarde: ECB is preparing for a new rate hike

EUR/USD analysis on September 29. Christine Lagarde: ECB is preparing for a new rate hike

The wave marking of the 4-hour chart for the euro/dollar instrument still does not require adjustments, but it is undoubtedly becoming more complicated. We saw the completion of the construction of another five-wave pulse descending wave structure, then one correction wave upward, after which the low wave 5 was updated. These movements allow me to conclude that the pattern of five months ago was repeated when the 5-wave structure was completed down, one wave up, and we saw five more waves down. There is no question of any classical wave structure (5 trend waves, 3 correction waves) right now. The news background is such that the market even builds single corrective waves with great reluctance. Thus, in such circumstances, I cannot predict the end of the downward trend segment. We can still observe for a very long time the picture of "a strong wave down - a weak corrective wave up." The goals of the downward trend segment, which has been complicated and lengthened many times, can be found up to 90 figures or even lower. A corrective wave 2 of a new downward trend section can be built at this time.

The ECB President assured us that she was not going to back down from the plans

The euro/dollar instrument rose by 10-20 basis points on Thursday, but the movement amplitude was much higher during the day. So far, the increase in the quotes of the instrument continues only for less than a day, which does not give grounds to conclude that the construction of a downward trend section has been completed. Moreover, the wave marking assumes the construction of a corrective wave, after which the "hell" for the euro can resume. At the moment, I can say that the news background remains negative for the EU currency, and even those rare pieces of news that could support the demand for the euro do not cause purchases.

One such piece of news was the three speeches by Christine Lagarde at once this week. These speeches did not differ much since the phrases were pronounced almost the same. In particular, Lagarde said that the ECB is preparing for a new rate hike by 75 basis points. Another increase will occur in December, after which the rate will reach a level that will no longer stimulate economic growth. "We are doing what we have to do," Lagarde said. "The achievement of the first goal – raising the rate to a neutral level – is close, then we will talk about a "restrictive" rate level," the ECB president said. Lagarde also clearly outlined the ECB's goals: not to reduce economic growth, not to provoke an increase in unemployment, not to cause a recession, and to maintain price stability. It's hard to say how all this can be achieved while raising the interest rate, but Lagarde knows better. Moreover, we are talking about the bank's goals, and no one said that all of them would be achieved. There are no formal reasons for the market to increase demand for the euro, but several FOMC members made similar statements this week.

EUR/USD analysis on September 29. Christine Lagarde: ECB is preparing for a new rate hike

General conclusions

Based on the analysis, I conclude that the construction of the downward trend section continues but can end at any time. At this time, the tool can build a corrective wave, so I advise selling with targets near the estimated mark of 0.9397, which equates to 423.6% Fibonacci, after the completion of this wave. I urge caution, as it is unclear how much longer the decline of the euro currency will continue.

At the higher wave scale, the wave marking of the descending trend segment becomes noticeably more complicated and lengthens. It can take on almost any length, so I think it's best to isolate the three and five-wave standard structures from the overall picture and work on them. One of these five waves can be just completed, and a new one has begun its construction.

Analyst InstaForex
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