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 the moment, the construction of another three-wave structure - a downtrend - which began on July 18th of last year, continues. The presumed wave 1 is complete, wave 2 or b has become more complex three or four times, but at the moment, it is also complete.
The upward trend section may still resume, but its internal structure in this case will be unreadable. I remind you that I try to identify unambiguous wave structures that do not tolerate ambiguous interpretations. If the current wave analysis is correct, then the market has moved on to forming wave 3 or c since December 28th. At the moment, wave 2 in 3 or c is presumably being constructed. If this is indeed the case, then the construction of this wave may be completed soon, as it has already taken on a clearly defined three-wave form. In any case, this decline in the pair's quotes should not end here. An unsuccessful attempt to break the 1.0956 mark, which is equivalent to 50.0% according to Fibonacci, indicates the completion of the corrective wave, but the retreat of quotes from the reached peaks is still too small.
The 1.0879 mark blocks the rise of the US currency.
The EUR/USD pair's rate did not change on Monday. Market activity and the range of movements were minimal as today's news background was very weak. Some might have thought that the report on European inflation for February would cause a market reaction, but two weeks ago, the market was already acquainted with the preliminary value of the indicator for February. The final value did not differ from it. The consumer price index slowed to 2.6% y/y, and the core index to 3.1% y/y. Based on these figures, one can assume that the ECB will not change its plans for the first rate cut as early as June. There are still several inflation reports before June. If during this time the index does not start to sharply accelerate, then in June, we will see the first easing of monetary policy in several years.
For the European currency, this is rather bad news than good. The longer the ECB rates remain at their peak, the more reasons the market has to maintain high demand for the euro. However, the wave analysis has been suggesting a strong and prolonged decline in the EUR/USD pair for several months now. Therefore, I expect a breakthrough of the 1.0879 mark, which corresponds to 61.8% according to Fibonacci, and a continuation of the decline. By the way, the FOMC meeting this week is unlikely to be "dovish," considering the recent acceleration of inflation in the United States. And this means that the dollar may receive additional support. Currently, at the beginning of the week, I believe that the likelihood of a decline in the pair over the next four days is very high.
General conclusions.
Based on the analysis conducted on EUR/USD, I conclude that the construction of a downward wave set continues. Wave 2 or b has taken on a completed form, so I expect the construction of an impulsive downtrend wave 3 or c with a significant decline in the pair soon. Currently, an internal corrective wave is being constructed, which could already be completed. I continue to consider only sales with targets located around the calculated mark of 1.0462, which corresponds to 127.2% according to Fibonacci.
On a larger wave scale, it is evident that the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci from the first wave, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and the decline of the pair below the 4-figure mark has begun to unfold.
The main principles of my analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to play and often bring changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There is no one hundred percent certainty in the direction of movement and there can never be. Do not forget about Stop Loss protective orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
