The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have seen only three-wave structures of a larger scale, constantly alternating with each other. At present, the construction of another three-wave structure continues – a downtrend that began on July 18 of last year. The presumed wave 1 is completed; wave 2 or b has become more complex three or four times, but at the moment, it is also completed.
The uptrend segment of the trend may still resume, but its internal structure will be absolutely unreadable in this case. I would like to remind you that I strive to identify clear and unambiguous wave structures that do not tolerate double interpretations. If the current wave analysis is correct, the market has moved on to form wave 3 or c. At the moment, the presumed wave 2 in 3 or c is being constructed. If this is indeed the case, the construction of this wave may be completed in the near future, as it has already taken on a clearly expressed three-wave form. In any case, the decline in pair quotes should not end there. An unsuccessful attempt to break through the level of 1.0956, which is equivalent to 50.0% according to Fibonacci, may indicate the completion of the corrective wave, but the pullback from the reached peaks is still too small.
The market continues to ignore the news background.
The EUR/USD pair increased by 10 basis points on Wednesday. This is a very small value, indicating complete inactivity today. Nevertheless, even such an increase in the European currency personally tells me a lot. Today, the only news of the day was the report on industrial production in the European Union. The market expected a decrease in volumes in January by 1.5% on a monthly basis and 2.9% on an annual basis. In reality, industrial production decreased by 3.2% on a monthly basis and 6.7% on an annual basis. This is not just a small decrease; it is a collapse. This is not just a slight mismatch with expectations; it is a huge mismatch with expectations. And demand for the euro did not decrease a point after this report. The market simply did not notice the unnecessary report for itself. And a few hours ago, demand for the euro began to rise again.
Based on this, an unsuccessful attempt to break through the level of 1.0956 may turn into a successful one in the next few days. The anticipated wave 2 in 3 or c will then assume an even more extended form, further separating us from the anticipated moment of the new decline in the pair. The worst part is that the market is not playing out the news background as it should. And it is unclear how many more strong reports for the dollar will "pass by" market participants. With each new report, the potential for the rise of the American currency is even more potentially ruled out. I continue to expect a decline in the euro, but it is much easier to believe in the new rise of the pair now.
General conclusions:
Based on the analysis of EUR/USD, I conclude that the construction of a bearish wave set continues. Wave 2 or b has taken on a completed form, so in the near future, I expect the continuation of the construction of an impulsive downward wave 3 or c with a significant decrease in the pair. Currently, an internal corrective wave is being constructed, which could already be completed. I continue to consider only sales with targets near the calculated level of 1.0462, which corresponds to 127.2% according to Fibonacci.
On a larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci of the first wave, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and a decrease in the pair below the 1.4-figure has begun to be implemented.
The main principles of my analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to play with; they often bring changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There is never 100% confidence in the direction of movement. Don't forget about protective stop-loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
