The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have seen only three larger-scale wave structures, which constantly alternate with each other. At the moment, the construction of another three-wave structure continues - a downtrend, which began on July 18 of last year. The presumed wave 1 is completed, wave 2 or b has become more complex three or four times, but at the moment, it is also completed.
The upward trend section may still be resumed, but in this case, its internal structure will be unreadable. I remind you that I try to identify unambiguous wave structures that do not tolerate double interpretation. If the current wave analysis is correct, then the market has moved on to forming wave 3 since December 28. At the moment, presumably wave 2 in 3 or c is being built. If this is indeed the case, then the construction of this wave may already be completed, as it has taken on a clearly defined three-wave appearance. In any case, this decline in pair quotes should not end there. The unsuccessful attempt to break through the level of 1.0956, which is equivalent to 50.0% according to Fibonacci, indicates the completion of the corrective wave, but the retreat of quotes from the reached peaks is still too small.
The market awaits new "hawkish" statements from the Fed.
The EUR/USD pair rate dropped by 15 basis points as of the beginning of the American session on Tuesday. By the end of the day, the pair's losses may be higher, but the range of movements remains low, as does market activity. However, the fact that demand for the European currency has decreased for two consecutive days this week may indicate a lot. Yesterday, there were no reasons for the market to sell euros. The inflation report did not provide any new information. Today, indices from the ZEW Institute on economic sentiment were released in the EU. Both turned out to be better than market expectations. Therefore, it would be more logical to see the pair rise. But two factors are holding the market back from buying.
The first factor is the wave. The wave pattern has been indicating the construction of an impulsive downward wave for a long time. No matter how hard the market tries to ignore it, it will not be able to do so constantly. The second factor is the Fed rate factor. In recent weeks (especially after the release of the new inflation report), expectations regarding rates have become even more "hawkish." Now, most economists are oscillating between two and three rounds of easing in 2024. And some even believe that the Fed may refrain from easing policy this year if inflation does not show a new slowdown. Inflation has hardly decreased in the US for three quarters now. Therefore, I can fully assume that the remaining three quarters may pass without a significant price slowdown. After all, the Fed no longer raises rates. Therefore, inflation may "lack fuel" for a new decrease.
General Conclusions.
Based on the conducted analysis of the EUR/USD, I conclude that the construction of a downward wave set continues. Wave 2 or b has taken on a completed form, so in the near future, I expect the continuation of the construction of an impulsive downward wave 3 or c with a significant decrease in the pair. Currently, an internal corrective wave is being built, which may have already been completed. I continue to consider only sales with targets near the calculated level of 1.0462, which corresponds to 127.2% according to Fibonacci.
On the larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci from the first wave, so it may be completed. If this is indeed the case, then the scenario of building wave 3 or c and lowering the pair below the 4-figure mark has begun to be implemented.
The main principles of my analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to play, they often bring changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There is never one hundred percent certainty about the direction of movement. Don't forget about protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
