The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have only seen three-wave structures of a larger scale, which constantly alternate with each other. The construction of another three-wave structure continues - a downward one, which began on July 18 of last year. The presumed wave 1 is complete; wave 2 or b has been complicated three or four times but is now also complete.
The uptrend phase may still resume, but its internal structure would be unreadable in this case. I strive to identify unambiguous wave structures that do not tolerate ambiguous interpretations. If the current wave analysis is correct, the market has moved on to forming wave 3 since December 28. At the moment, wave 2 in 3 or b is complete. If this is true, then the quote decline will continue. An unsuccessful attempt to break the level of 1.0956, which is equivalent to 50.0% according to Fibonacci, also indicates the completion of the corrective wave.
Euro Maintains a Bearish Sentiment
The EUR/USD pair rate declined by 15 basis points on Wednesday. The range of movements has become even lower compared to Monday, Tuesday, and the entire previous week. However, the news background was strong last week, while in the first three days of this week, the market did not receive any important news. ECB Governing Council members continue to hint at a rate cut in June in every possible way, but what's new in this information? Ms. Christine Lagarde announced two months ago that the regulator would have enough information in early summer to consider lowering interest rates. FOMC members continue to mention different dates suitable for the first easing, mentioning different numbers of easing rounds planned for 2024. But what's new in this information for the market?
I prefer to rely on the Fed's official statement from March 20 soon. It was stated that achieving the target inflation rate is in doubt, and the number of planned rate cuts in 2025 has been reduced by one round. Everything indicates that the market has jumped too far ahead and has already managed to play out more rate cuts by the Fed than the American central bank originally planned. If this is the case (and it is), demand for the US currency should gradually increase, as the "hawkish" policy will continue much longer than the market expected.
General Conclusions
Based on the analysis of EUR/USD, the construction of a bearish set of waves continues. Wave 2 or b has taken on a completed form, so I expect to continue building a downward impulsive wave 3 or c with a significant decline in the pair. I continue to consider sales with targets around the calculated mark of 1.0462, corresponding to 127.2% according to Fibonacci.
On the senior wave scale, the presumed wave 2 or b, which by length was more than 61.8% according to Fibonacci from the first wave, may be complete. If this is the case, the scenario with the construction of wave 3 or c and a decline in the pair below the 4-figure level has begun to unfold.
The main principles of my analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to play out and often entail changes.
- If there is confidence in what is happening in the market, it is better to avoid entering it.
- There is never one hundred percent certainty in the direction of movement. Remember about Stop Loss protective orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
