The wave count on the 4-hour chart for EUR/USD has undergone minor changes, but nothing fundamental has changed. There is still no talk of canceling the upward segment of the trend that began in January of last year; only the internal wave structure is adjusted from time to time. In my view, the pair has completed the construction of the global corrective wave 4. If this assumption is correct, the construction of wave 5 has now begun and is continuing, with targets extending as far as the 25th figure.
The internal wave structure of the presumed wave 5 is not entirely clear. The upward wave sequence cannot be considered impulsive due to rather strong corrective waves. Therefore, at the moment it is interpreted as an a-b-c-d-e structure. However, if wave 5 takes on an extended form, its internal structure will also be quite complex. As a result, we may currently be observing the formation of wave 3 of 3 of 5. In any case, I expect further appreciation of EUR/USD with targets located near the 1.2040 level, which corresponds to the 127.2% Fibonacci level.
The EUR/USD pair gained approximately 50 basis points during Monday (including the opening gap), and another 50 on Tuesday, with the day not yet finished. Thus, just at the beginning of the new week, the U.S. currency has lost one cent in value. Overall, in January the U.S. dollar has fallen nearly 200 points against the euro, although it would be more accurate to note that the dollar's decline began only about a week and a half ago.
Why is the market selling off the dollar again this week? The reasons are the same as before. Analyzing and forecasting under Donald Trump is simple and straightforward: a trending decline of the dollar with corrections along the way. Corrections can, of course, become complex and prolonged, which confuses some traders—the news background remains negative for the dollar, yet it temporarily rises in value. However, I have repeatedly said that demand for the U.S. currency will decline in the long term. The new year fully confirms my expectations.
Today it became known that import tariffs on South Korea have been increased. Donald Trump was displeased that South Korea's parliament has still not ratified the trade agreement that was negotiated last summer. Since "South Korean politicians are unable to do their job properly," Trump decided to speed up the process by raising tariffs to 25%. At the same time, he also accelerated the decline of the U.S. currency.
We should also not forget about the tariffs on Canada. Although there is a lot of uncertainty surrounding this issue (Canada is not planning to sign a free trade agreement with China, which is what Trump accuses it of), Trump is clearly seeking concessions—either tariffs or a refusal to trade with Beijing. The market continues to react to Trump's policy in a clear and irreversible manner.
General Conclusions
Based on the EUR/USD analysis conducted, I conclude that the pair continues to build an upward segment of the trend. Donald Trump's policies and the Federal Reserve's monetary policy remain significant factors behind the long-term decline of the U.S. currency. The targets of the current trend segment may extend as far as the 25th level. At present, I believe that corrective wave 4 has completed its formation, and therefore I expect further price growth, with the first target located near the 1.2040 level.
On a smaller scale, the entire upward trend segment is visible. The wave count is not the most standard, as the corrective waves differ in size. For example, the higher-degree wave 2 is smaller than the internal wave 2 within wave 3. However, this can also occur. Let me remind you that it is best to identify clear and understandable structures on charts rather than strictly tying everything to each individual wave. At the moment, the bullish wave structure raises no doubts.
Core Principles of My Analysis:
- Wave structures should be simple and clear. Complex structures are difficult to trade and often imply changes.
- If there is no confidence in what is happening in the market, it is better to stay out of it.
- There is no such thing as 100% certainty in market direction and never will be. Do not forget to use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
