The wave pattern on the 4-hour chart for the EUR/USD instrument remains unchanged. Currently, we are observing the construction of the presumed wave 3 in 3 or c of the downward trend segment. If this is indeed the case, the decline in quotes will continue for quite some time, as the first wave of this segment completed its formation around the 1.0450 mark. Therefore, the third wave of this trend segment should complete below this level, even if it takes a non-impulsive form.
The 1.0450 mark is the target for the third wave. If the current downward trend segment takes on an impulsive form, we will see a total of five waves, and the euro could fall below the 1.0000 mark. Admittedly, it isn't easy to expect such a development now, but the currency market has seen plenty of surprises in recent years.
An alternative scenario is the transformation of wave 3 or c into a corrective form with five waves of type a-b-c-d-e. Even in this case, the low of wave 3 or c should be below the low of wave 1 or a. Therefore, if the construction of wave e in 3 or c has begun, rather than 3 in 3 or c, the instrument's decline should continue.
Inflation in the Eurozone Slowly Returns to a Minimum
The EUR/USD exchange rate rose by 30 basis points on Wednesday, but given the recent movement patterns, it might decline from the peaks reached during the American session by the end of the day. The current situation is best observed on the 4-hour chart. Over the past 2-3 weeks, the instrument has been constantly oscillating between the levels of 1.0670 and 1.0770. Over the past 2-3 months, it has been fluctuating between 1.0600 and 1.0900. Consequently, we have been dealing with various ranges for quite some time. In other words, ranges are constantly forming on charts of almost all scales. Clearly, under such circumstances, the targets I and other analysts set are not being reached, or it may take months to achieve them.
Today, the market only reacted to the ADP report in the US, which shows the number of jobs created in the non-agricultural sector. I want to remind you that the same is shown by the more important Nonfarm Payrolls, which will be released on Friday. According to ADP, 150,000 new jobs were created in June, compared to the market expectation of 160,000. The difference between expectations and reality is minimal, so I do not expect a significant drop in the US currency today. Moreover, it does not align with the current wave pattern, which still suggests a decline in the instrument. However, we have neither a decline nor movement nor market activity.
General Conclusions
Based on the analysis conducted on EUR/USD, the construction of the downward wave set continues. In the near future, I expect the formation of the downward wave 3 or c to continue, with a significant decrease in the instrument. I continue to consider only sales with targets around the calculated mark of 1.0462. The internal wave structure of wave 3 or c may take on a five-wave corrective form, but even in this case, the quotes should drop to the range of 4-5 figures.
On a larger wave scale, it is visible that the proposed wave 2 or b, which by length amounted to more than 76.4% of the Fibonacci retracement from the first wave, may be completed. If this is indeed the case, then the scenario of constructing wave 3 or c and the instrument's decline below the 4th figure continues to be realized.
Key Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to trade as they often change.
- If one has confidence in the market's performance, it is better to avoid entering it.
- There is never 100% certainty in the direction of movement. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
