Forex Analysis & Reviews: 05.04.2022 - EUR/USD analysis on April 5....

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05.04.2022 04:17 PM

EUR/USD analysis on April 5. An important point for the European currency

The wave marking of the 4-hour chart for the euro/dollar instrument has become a little more complicated due to the recent increase in quotations. Now the assumed wave 4 has taken a five-wave form and fits rather poorly into the current wave layout, in which the corrective wave 2 is very short. Nevertheless, the wave pattern does not require drastic changes right now. If the construction of the proposed wave 4 has ended after all (the wave can no longer take a more complex form), then the tool has started building the proposed wave 5 in E. If the increase in quotes resumes again, then the entire wave marking will require adjustments. I note that wave 4 looks like a correction in any case, and, accordingly, it cannot be the first wave of a new upward trend segment. The 127.2% Fibonacci level, near which waves a and c ended at 4, did not miss the instrument above itself. An unsuccessful attempt to break through it indicates that the market is ready for new sales of the instrument. Thus, at this time, the wave marking remains, and the demand for the US dollar is rising again due to the difficult geopolitical situation in Ukraine.

The euro currency has no other option but to decline.

The euro/dollar instrument did not decrease by 1 point on Tuesday. But at the same time, it did not increase by 1 point. The instrument has been trading all day with an amplitude of 15 basis points, which is a record this year with a minus sign. Since there have been no price changes today, the wave marking does not require any additions or clarifications. This means that the instrument will soon try to make a successful attempt to break the 1.0948 mark, which corresponds to 161.8% Fibonacci. This mark is also the low of the previous wave d at 4. Thus, the instrument has the opportunity to form a confirmation of the transition to the construction of a new downward wave E. If this does not happen, but the increase resumes, then it is unlikely to belong to the corrective wave 4. In this case, the entire wave marking may require serious changes.

Business activity data has been released in the European Union today. The index for the service sector rose from 54.8 to 55.6 points in March, and the composite index rose from 54.5 to 54.9. However, these data did not interest the market at all. The same applies to the report on the foreign trade balance, the PMI index for the services sector in the United States, and the composite PMI index in the United States. Strictly speaking, these data from the very beginning did not cause any expectation of market activity. Much more important now is the new, fifth, package of EU sanctions against Russia. Yesterday, it was announced, and today Ursula von der Leyen said that it could be adopted tomorrow. This package includes a complete embargo on the import of coal from the Russian Federation, sanctions against four more banks of the Russian Federation, personal sanctions against officials of the Russian Federation, and a ban on entry into European ports for all vessels from the Russian Federation. So far, we are not talking about the introduction of an embargo on oil or gas, but there is no doubt that if the situation in Ukraine worsens, then it will also come to this step.

General conclusions

Based on the analysis, I still conclude that the construction of wave E is currently underway. If so, now is still a good time to sell the European currency with targets located around the 1.0723 mark, which corresponds to 200.0% Fibonacci, for each MACD signal "down". The current wave marking assumes the construction of wave 5 in E. This option will be canceled in case of a successful attempt to break the 1.1153 mark, which is equivalent to 127.2% Fibonacci.

On a larger scale, it can be seen that the construction of the proposed wave D has been completed, and the instrument has updated its low. Thus, the fifth wave of a non-pulse downward trend section is being built, which may turn out to be as long as wave C. If this assumption is correct, then the European currency will still decline.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.