The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. At the moment, we observe the construction of the presumed wave 3 in 3 or c of the downtrend section. If this is indeed the case, the decline in quotes will continue for a very long time, as the first wave of this section completed its construction around the 1.0450 mark. Therefore, the third wave of this trend section should end even lower.
The market continues to slowly reduce demand for the euro currency as if hesitating in its actions, although the news background fully supports the US dollar. The unsuccessful attempt to break through the 1.0955 mark, which is equivalent to 61.8% according to Fibonacci, indicated the completion of the construction of wave 2 in 3 or c. Therefore, there is potential for a decline in the pair, and it is significant.
Is there a probability of a different wave analysis? Yes, it is always there. However, if we have been observing a new uptrend section since October 3 of last year, then the previous downtrend wave does not conform to any structure, which is not possible. Therefore, an upward section is possible only with a strong complication of the wave analysis.
The market is preparing for Friday.
The EUR/USD pair rate rose by 65 basis points on Wednesday, and today, it added another 40. In just two days, the European currency has grown by a whole cent, although the news background supported not only buyers but also sellers. I will start with the former. Yesterday, when demand for the US currency was already actively declining, the ISM report on business activity in the service sector was released. It turned out to be below market expectations, at only 51.4 points, which became a sufficient reason for the market to continue to reject the American currency.
However, it is not worth analyzing only one report and disregarding all the others. I believe that the report on European inflation was even more important than ISM. The ISM index remained above the 50.0 mark, and any value above this mark means that the sector is growing and expanding. Therefore, the value of 51.4 was below market expectations but still positive. The report on inflation in the EU showed a decrease to 2.4%, which also did not meet market expectations. Moreover, it was the sellers who were supposed to take the initiative yesterday, as rapidly falling inflation means that the ECB may consider the first easing of monetary policy as early as April. While this is hard to believe, such an option becomes more likely.
Based on all of the above, yesterday's growth was not justified. Wave analysis continues to suggest a decline, and the news background of Wednesday supported not only the European currency. The unsuccessful attempt to break through the 1.0880 mark, which is equivalent to 61.8% according to Fibonacci on the upper chart, may cause a resumption of the construction of wave 3 or c.
General conclusions.
Based on the analysis of the EUR/USD, the construction of a bearish wave set continues. Waves 2 or b and 2 in 3 or c are completed, so in the near future, I expect the continuation of the construction of an impulsive downward wave 3 in 3 or c with a significant decrease in the pair. I continue to consider sales with targets around the calculated mark of 1.0462, which corresponds to 127.2%, according to Fibonacci.
On the larger wave scale, it can be seen 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 a decrease in the pair below the 4-figure has begun to be implemented.
The main principles of my analysis are:
- Wave structures should be simple and understandable. Complex structures are difficult to play with; they often bring changes.
- If there is confidence in what is happening in the market, it is better to avoid entering it.
- There is never a hundred percent certainty in the direction of movement. Remember protective stop-loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
