empty
05.01.2024 06:09 PM
EUR/USD. Analysis for January 5th. European inflation rises again

The wave analysis of the 4-hour chart for the euro/dollar pair has become more complex. Over the past year, we have observed only three wave structures that constantly alternate with each other. Currently, the construction of another three-wave decline continues. The presumed wave 1 has been completed, but wave 2 or b has become more complex three or four times, and there are no guarantees that it won't become even more complex.

Although the news background cannot be considered "supportive of the European currency," the market always finds new reasons to increase demand for the pair. Such a situation is not normal. Even if the upward segment of the trend resumes, its internal structure will become completely unreadable.

The internal wave analysis of the presumed wave 2 or b has changed. Since the last downward wave turned out to be disproportionately large, I now interpret it as a wave b. If this is the case, wave c is currently being constructed, and the entire wave 2 or b can still end at any moment (or may have already ended). The current retreat from the reached highs looks convincing, so we can expect a transition to wave 3 or c construction.

Eurozone inflation followed Germany's lead.

On Friday, the euro/dollar currency pair saw a 20 basis point decline. However, such a statement should not confuse my readers – during the day, the amplitude of movements was quite high, and quotes changed direction several times. In the first half of the day, there was a decline. As expected, the report on European inflation showed an acceleration in the pace of price growth, but it was less than anticipated. The market's expectation-to-reality mismatch was only 0.1%: 2.9% y/y vs. 3.0% y/y.

However, technically, inflation accelerated less, which implies a drop in the euro since the market expected more. If inflation had risen by more than 3%, it would have meant that the ECB would postpone the start of the monetary policy tightening procedure indefinitely. The rise in inflation to 2.9% essentially means the same thing, but here, the expectation-to-reality ratio played a role. Since reality turned out to be less severe, the market had a reason to reduce demand for the euro.

A couple of hours ago, the Nonfarm Payrolls and unemployment reports were released in America. These two reports can unequivocally be considered in favor of the dollar, but the market again failed or did not want to support the construction of a potential wave 3 or c. The US dollar rose for a very short period, then immediately retreated. An unsuccessful attempt to break through the 1.0881 level, corresponding to 61.8% Fibonacci, played a role.

This image is no longer relevant

General conclusions.

Based on the analysis conducted, the construction of a bearish wave set continues. The targets around the 1.0463 mark have been perfectly worked out, and an unsuccessful attempt to break this level indicated a transition to the construction of a corrective wave. Wave 2 or b has taken on a completed form, so I expect the construction of an impulsive downward wave 3 or c with a significant decline in the pair soon. The unsuccessful attempt to break through the 1.1125 level, corresponding to 23.6% Fibonacci, indicated the market's readiness for selling.

On the larger wave scale, we can see that the construction of corrective wave 2 or b continues, which is no longer than 61.8% Fibonacci from the first wave. As I have already mentioned, this is not critical, and the scenario with the construction of wave 3 or c and a decline in the pair below the 1.04 level remains in force.

Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Weekly Forecast Based on Simplified Wave Analysis for GBP/USD, AUD/USD, USD/CHF, EUR/JPY, AUD/JPY, and the US Dollar Index — April 21st

GBP/USD Analysis: Since the beginning of this year, GBP/USD has been forming an upward wave on the daily chart. The pair has now reached the boundaries of a wide potential

Isabel Clark 09:31 2025-04-21 UTC+2

Weekly Forecast Based on Simplified Wave Analysis for EUR/USD, USD/JPY, GBP/JPY, USD/CAD, NZD/USD, and Gold – April 21st

Analysis:Since February, EUR/USD has been forming an upward wave, with the final part (C) currently in progress. Recently, the pair pushed through the lower boundary of a strong potential reversal

Isabel Clark 09:25 2025-04-21 UTC+2

EUR/USD Analysis on April 17, 2025

The wave structure on the 4-hour EUR/USD chart has shifted into a bullish impulse formation. I believe there's no doubt this transformation occurred solely due to the new U.S. trade

Chin Zhao 19:12 2025-04-17 UTC+2

GBP/USD Analysis on April 17, 2025

The GBP/USD pair remained unchanged on Thursday. While such market behavior might have been expected for Thursday, it was surprising not to see a decline on Wednesday, given the number

Chin Zhao 19:09 2025-04-17 UTC+2

Analysis for EUR/USD on April 16, 2025

The wave structure on the 4-hour chart for the EUR/USD pair has shifted into a bullish formation. I think there's little doubt that this transformation was caused solely

Chin Zhao 18:56 2025-04-16 UTC+2

Analysis for GBP/USD on April 16, 2025

The wave structure of the GBP/USD pair has also transformed into a bullish, impulsive formation — "thanks" to Donald Trump. The wave pattern is almost identical to that of EUR/USD

Chin Zhao 18:53 2025-04-16 UTC+2

Analysis for EUR/USD on April 15, 2025

The wave structure on the 4-hour chart for EUR/USD has shifted into a bullish formation. I believe there's little doubt that this transformation is entirely due to the new U.S

Chin Zhao 19:03 2025-04-15 UTC+2

Analysis for GBP/USD on April 15, 2025

The wave structure for GBP/USD has also transformed into a bullish, impulsive formation — "thanks" to Donald Trump. The wave pattern is almost identical to that of EUR/USD. Until February

Chin Zhao 18:56 2025-04-15 UTC+2

Analysis for GBP/USD on April 14, 2025

The wave structure of the GBP/USD pair has also transitioned into a bullish, impulsive formation— thanks to Donald Trump. The wave pattern looks almost identical to that of EUR/USD

Chin Zhao 19:09 2025-04-14 UTC+2

Analysis for EUR/USD on April 14, 2025

The wave structure on the 4-hour chart for the EUR/USD pair has transitioned into a bullish formation. I believe there is little doubt that this shift occurred solely

Chin Zhao 19:05 2025-04-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.