The wave analysis of the 4-hour chart for the euro/dollar pair remains non-standard and has not changed in recent weeks. The deviation of quotes from previously reached highs continues, so the three-wave upward structure can be considered complete. The ascending trend segment could still theoretically take on a five-wave corrective form. Still, at the moment, I expect the formation of a downward trend segment, which is likely to also consist of three waves. Recently, I have consistently mentioned that I expect the pair to be around the 5th figure, where the formation of the upward three-wave structure began.
The upper point of the last trend segment was only a few dozen points higher than the highest point of the previous upward segment. Since December of last year, the pair's movement can be considered horizontal, and such a character of movement will persist. In the past 2.5 months, demand for the euro currency has been constantly rising, but I have repeatedly pointed out that the news background for the euro currency is not strong enough to support such confident price growth. However, it is now becoming clear that it was necessary to complete a convincing upward set of waves to proceed with forming a downward set, which is what we are currently seeing.
There are fewer problems, but the market wants a correction.
The euro/dollar exchange rate increased by 20 basis points on Tuesday, and the range of movements noticeably grew. Yesterday was a public holiday in the United States, and today the markets woke up, and the movements immediately became more noticeable and tangible. I want to immediately note an important point that can determine the market trend in the coming weeks. There was an unsuccessful attempt to break through the Fibonacci level of 23.6%. From this point, the pair may start building an upward wave corresponding to the current wave labeling - wave b. Therefore, in the next few weeks, we may observe increased demand for the euro currency regardless of the news background. A successful attempt to break the level of 1.0678 will indicate the market's readiness to build the third wave as part of the current trend segment.
There was no significant news background yesterday and today. There were no interesting news or events, except for the news of an agreement between Democrats and Republicans regarding the US debt ceiling. However, this news came over the weekend. The second half of the week is expected to be much more eventful regarding the news. Tomorrow, there will be a report on inflation in Germany, and in the US, a report on job openings, which reflects the state of the labor market. On Thursday and Friday, there will be even more important reports. These include inflation in the EU, reports on the labor market, and unemployment in the US. Let's remember the ADP report on Thursday and the ISM Business Activity Index. This data can significantly impact market sentiment, but the wave analysis remains the key factor.
General conclusions.
Based on the analysis, I concluded that the formation of the upward trend segment is complete. Therefore, it is advisable to recommend selling now, and the pair has considerable room for decline. I still consider the targets around 1.0500-1.0600 quite realistic. With these targets in mind, I recommend selling the pair. The formation of a corrective wave may begin from the level of 1.0678, so consider new sales in the event of a successful attempt to break this level.
On a larger wave scale, the wave labeling of the upward trend segment has taken an extended form but is likely complete. We have seen five upward waves, likely representing the structure of a-b-c-d-e. The formation of the downward trend segment may still need to be completed, and it can take any form in terms of structure and length.
