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, which constantly alternate with each other. At the moment, the construction of another three-wave structure continues - a downtrend that began on July 18th of last year. The presumed wave 1 is completed, wave 2 or b has become more complex three or four times, but is also currently completed.
The upward segment of the trend may still be resumed, but its internal structure, in this case, will be completely unreadable. I try to identify unambiguous wave structures that do not tolerate ambiguous interpretation. 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 completed. If this is indeed the case, the decline in quotes will continue. An unsuccessful attempt to break through the level of 1.0956, which is equivalent to 50.0% Fibonacci, also indicates the completion of the corrective wave.
The results of the FOMC meeting determined the dynamics of the pair in the near future
The EUR/USD pair rate decreased by almost 80 basis points on Thursday and today, the demand for the European currency continued to decline, but already, undoubtedly, at a slower pace. Today's news background could have been stronger. In Germany, the IFO Business Climate Index was released, which only slightly exceeded market expectations. It did not have a significant impact on the exchange rate of the European currency. And there were no other events in the European Union or the United States today. Late in the evening, ECB Chief Economist Philip Lane will speak, but this will be practically just before the market closes. There is nothing to suggest that active market participants' actions are possible today.
The key event of this week was the FOMC meeting. Powell's more hawkish rhetoric and the absence of "dovish" signals show the market that its expectations are once again too high. Market participants cannot reconcile themselves with the idea that the Fed is not inclined to move to a more accommodative monetary policy until it is confident in reducing inflation to the target level. Based on this, June, as the month for the first FOMC rate cut, is a very conditional date. First, it was March; now it is June, and in a month, it could be September. Meanwhile, the market continues to wait and wait for the first easing in the US, constantly believing that this moment is near. And it still has yet to happen. And the longer it is postponed, the stronger the dollar's inclination towards further appreciation against the euro, whose ECB has already, it seems, decided on the date of the first rate cut.
General conclusions
Based on the analysis of EUR/USD, the construction of a downtrend 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 impulse downward wave 3 or c with a significant decrease in the pair. Currently, an internal corrective wave is being constructed, which could have already been completed. I continue to consider only sales with targets located near the calculated level of 1.0462, which corresponds to 127.2% Fibonacci.
On a larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% Fibonacci of the first wave, so it may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and a decline in the pair below the 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 out; they often bring changes.
- If there is confidence in what is happening in the market, it is better to avoid entering it.
- There is no one hundred percent certainty in the direction of movement, and there never can be. Remember about Stop Loss protective orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
