The wave pattern on the 4-hour chart for the EUR/USD instrument remains unchanged. Currently, we are observing the construction of a proposed wave 3 in 3 or c of the downward trend segment, which is taking a very complex form. If this assumption is correct, 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, considering market activity. The third wave of this trend segment should end lower, even if it does not take an impulsive form.
The 1.0450 mark is the target only for the third wave. If the current downward trend segment takes an impulsive form, we will see a total of five waves, and the euro could drop below the 1.0000 mark. This scenario seems unrealistic in recent weeks and months, and the wave pattern may transform into a more complex one.
An alternative scenario is transforming 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. Thus, if the construction of wave e in 3 or c has now begun and not 3 in 3 or c, then the instrument's decline should still resume.
The Market Is Confused and Simply Waiting
The EUR/USD rate increased by 8 basis points on Wednesday. If I had repeatedly written earlier about the low amplitude of movements and low market activity, these indicators would have dropped even lower. On Monday, the instrument added 20 points, on Tuesday, it decreased by 10, and today, it shows no movement at all. This is partly due to an empty news calendar, but is it empty?
Yesterday, Jerome Powell spoke in the US Congress; today, there will be another speech. Is it fair for the market to treat these two events as secondary? I agree that the Fed Chairman did not report anything radically new yesterday. Still, at the same time, he allowed for an earlier rate cut and also added that reducing inflation to the target mark could take longer than previously expected. Thus, based on Powell's speech, the dollar could rise and fall. Powell noted to Congress that further declines in GDP and economic activity combined with the labor market could lead to monetary policy easing. However, at the same time, inflation is still too high to cut the rate. Given the above, I am now surprised by the market's absolute passivity rather than any movements.
General Conclusions
Based on the analysis of EUR/USD, the construction of a downward set of waves continues. In the near future, I expect the resumption of the construction of the downward wave 3 in 3 or c. I consider only sales with targets around the calculated mark of 1.0462. Still, the current wave structure is very complex and has very deep corrective waves, which should be considered. It may become even more complex in the near future, but I see no reason to expect the construction of an upward set of waves right now.
On a larger wave scale, it is visible that the proposed wave 2 or b, which extended over 76.4% Fibonacci from the first wave, may be completed. If this is the case, the scenario with the construction of wave 3 or c and the instrument's decline below the 4-figure mark continues to unfold.
Basic Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to trade and often carry changes.
- If there is confidence in what is happening in the market, it is better to avoid entering.
- There is never 100% certainty in the direction of movement. Remember protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
