The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have seen only three wave structures that constantly alternate with each other. Throughout 2023, I regularly mentioned that I expected the pair near the 5th figure, where the construction of the last upward three-wave structure began. This target was reached after the decline in July–October. After reaching this target, the construction of corrective wave 2 or b began, which has already taken a clear five-wave but more complex form due to the US inflation report. Nevertheless, the working scenario remains the same - wave 3 or c construction.
Regardless of the outcome of wave 2 or b (I warned that it could be much more complex), the overall decline of the European currency will not be completed, as in any case, the construction of the third wave of the downward trend is required. Most likely, wave e in 2 or b took on a five-wave extended form but may already be completed.
Americans changed their opinion about the dollar.
The euro/dollar pair fell by 65 basis points on Monday. This is not much, but it is enough to conclude the completion of wave 2 or b. I remind you that I expected the completion of this wave about two weeks ago, but its last internal wave took on a more extended form than I assumed, so we are only now seeing the beginning of the assumed wave 3 or c. Better late than never. Today, there were no significant reasons for an increase in demand for the dollar in the market, but the American session opened, and purchases of the US currency began. This is logical because the euro can only continuously grow with a strong news background. And there is no strong news background now. Throughout the past week, only one important report did not favor the dollar – the ISM index on Friday. Other important reports (inflation in the EU and GDP in the US) supported the dollar. Therefore, perhaps the worst for the dollar is already behind.
This week, it will have to go through four exams in the form of ISM, non-farm payrolls, ADP, and unemployment reports. If these reports do not disappoint the markets, as they did a month ago, we can expect further dollar growth, corresponding to the current wave pattern and my expectations. The minimum target for the pair's decline is seen at 1.0462, which is equivalent to 127.2% Fibonacci.
General Conclusions.
Based on the analysis conducted, the construction of a downward wave set continues. Targets around the level of 1.0463 have been ideally worked out, and the unsuccessful attempt to break through this level indicated a transition to the construction of a corrective wave. Wave 2 or b has taken on a completed form, so in the near future, I expect the construction of an impulsive downward wave 3 or c with a significant decline in the pair. I still recommend selling with targets below the low of wave 1 or a. At this time, wave 2 or b can be considered complete.
On the larger wave scale, it can be seen that the construction of corrective wave 2 or b continues, which in length is already more than 61.8% Fibonacci from the first wave. As I mentioned earlier, this is not critical, and the scenario with the construction of wave 3 or c and a decrease in the pair below the 4th figure remains in force.
