The wave analysis of the 4-hour chart for EUR/USD remains clear. The upward trend that started last year has taken on a complex structure, with the past six months showing only alternating three-wave structures. I have consistently mentioned my expectation for the pair to reach near the 1.5 figure, where the construction of the last upward three-wave structure began. While I haven't changed my stance, it is necessary to wait for the conclusion of the current upward trend, which might have already been completed.
Theoretically, the part of the trend that began on May 31 could form an impulse five-wave structure, but it is challenging to speak with certainty about this now. The news background does not provide enough strength for the euro currency to maintain stable demand, and the economic statistics remain mediocre. The successful attempt to break through the 1.1172 level, corresponding to 127.2% according to Fibonacci, indicates the market's inclination to sell. The target of 1.1034, equivalent to 100.0% according to Fibonacci, has been reached.
Is the dollar preparing for growth?
On Wednesday, the euro/dollar currency pair experienced a ten basis points increase, with weak amplitude in movements and virtually no news background today. The market primarily focused on the American report on new home sales, which showed a 2.5% decrease, weaker than expected. However, the market has yet to react to this data, awaiting the FOMC meeting and its outcomes.
What can we expect in the evening? The answer to this question is well-known to every trader. However, it does not mean the market will remain still in the evening. On the contrary, much will depend on Jerome Powell's statements during the press conference. We are still determining his message to the markets, leading to anticipated volatility without a clear prediction for the trading direction. The perspective matters most, at least for the next few days. If the market receives clear signals today that the Federal Reserve will maintain its current pace of monetary policy tightening (one hike in two meetings), demand for the US dollar may increase in the last days of the week. Nevertheless, it is essential to remember that the ECB meeting is scheduled for tomorrow, and Christine Lagarde's speech will also be significant.
Considering all the above, it is advisable to refrain from entering the market tonight and tomorrow during the day. Movements may be highly volatile, with frequent market reversals. The best approach is to analyze the outcomes of both meetings rationally and assess whether the current downward wave will conclude this week or continue.
General Conclusions
Based on the conducted analysis, the construction of the upward wave set is complete. I still consider the targets in the 1.0500-1.0600 range quite feasible and recommend selling the pair with these targets in mind. The a-b-c structure appears comprehensive and convincing, with the closing below the 1.1172 level indirectly affirming the formation of a downward trend. I recommend selling the pair with targets below the 1.1034 level. However, new MACD signals or a successful attempt to break through this level are required since this target has already been achieved.
On a larger wave scale, the upward structure of the trend has assumed an extended form and is likely completed. We have observed five upward waves, probably forming the structure a-b-c-d-e. The pair is moving towards constructing another downward three-wave structure, having previously developed four three-wave structures: two downward and two upward.
