The wave pattern on the 4-hour chart for EUR/USD has changed. There is still no talk of canceling the upward trend segment (lower chart), which has been in place since January of last year, but the wave structure itself now looks highly ambiguous. In such situations, I always recommend switching to a lower timeframe (upper chart) and focusing on the simplest and smallest wave structures in order to make short-term forecasts—which is sufficient for opening trades. Wave structures can be very complex and allow for multiple scenarios. The easiest approach is to trade based on standard "five-three" patterns.
In the chart above, I can identify a classic five-wave impulsive structure with an extended third wave. If this is indeed the case, then the formation of this structure is complete, and we should expect the development of a corrective sequence of at least three waves. Therefore, in the near term, we should expect an increase in quotes, but within a correction relative to the latest trend segment. For now, the latest wave structures do not fit well into the higher-level count, but clarity should come over time. In the near future, the euro may recover toward the 1.1666 and 1.1745 levels.
The EUR/USD pair rose by 20 basis points on Monday and added another 20 points on Tuesday. In this review, one could analyze the ISM Services PMI, durable goods orders, or revisit labor market and unemployment reports. However, I will not do that, as Friday was quite revealing for me. I have previously stated that the economic data flow is currently of little interest to market participants. There is no other way to explain the mere 20-point range on Friday. Of course, one might attribute the low activity to the Easter period or to conflicting data. However, I would like to remind you that when the market reacts sharply to unemployment and payroll data, no one looks for contradictions in the reports. Therefore, I do not believe that the market's reaction on Friday, Monday, and Tuesday is due to conflicting data or Easter holidays—especially since Easter is celebrated on weekends.
The market is not just waiting for a decision from Donald Trump, who just hours ago posted the following on his own social network: "Tonight, an entire civilization will perish; it will never be restored. I do not want this to happen, but it probably will. Forty-seven years of extortion, corruption, and death will finally end. God bless the great people of Iran!" The market remains in complete uncertainty, as earlier this morning Trump stated that negotiations with Tehran are ongoing. However, they do not appear to be very successful if he continues to prepare for the destruction of an entire country. The market does not know what or whom to believe and prefers to wait for official information.
General Conclusions
Based on the EUR/USD analysis, I conclude that the instrument remains within an upward trend segment (lower chart), while in the short term it has completed a downward wave sequence. Since a five-wave impulsive structure has been completed, readers can expect a rise in quotes over the coming week, with targets around 1.1666 and 1.1745, corresponding to the 38.2% and 50.0% Fibonacci levels. Further movement will depend entirely on developments in the Middle East.
On the lower timeframe, the entire upward trend segment is visible. The wave structure is not entirely standard, as corrective waves differ in size. For example, the higher-level wave 2 is smaller than the internal wave 2 within wave 3. However, such cases do occur. I would like to remind you that it is better to identify clear and understandable structures on charts rather than strictly adhering to labeling every wave. The trend may reverse in the near future.
Key Principles of My Analysis:
- Wave structures should be simple and clear. Complex structures are difficult to trade and often subject to change.
- If there is no confidence in market conditions, it is better to stay out.
- Absolute certainty in market direction is impossible. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
