Forex Analysis & Reviews: 17.10.2024 - Analysis for EUR/USD on...

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17.10.2024 06:09 PM

Analysis for EUR/USD on October 17th. The ECB meeting did not help the euro

The wave structure on the 4-hour chart for EUR/USD is becoming increasingly complex. Since January 2024, I can identify only two three-wave patterns (a-b-c) with a reversal point on April 16. After the completion of the current wave c, the formation of a new three-wave downward sequence may begin. The presumed wave c has already taken on a five-wave structure and now appears to be complete. If this is indeed the case, we may now see the development of a new corrective set of waves, which could be quite extended.

However, the entire trend section from April 16 could also take on a five-wave form (a-b-c-d-e). This scenario should not be ruled out, although its likelihood is low. I want to remind you that the news background may "mislead" for a month, two, or three, but not indefinitely. Recent reports from the U.S. indicate that if a crisis was brewing, it has already passed. The economy may slow down, but its current growth rate suggests that this period can be navigated smoothly. The labor market "cooled" in 2024, but now, with the easing of monetary policy, it is set to recover, as proven by recent labor market reports.

The Euro Continues to Fall

The EUR/USD pair dropped by 30 basis points on Wednesday and lost another 15 on Thursday, but the day isn't over yet, and we still have Christine Lagarde's speech at the press conference following the ECB meeting. In my view, the euro could be in demand today if the ECB president adopts a more "hawkish" tone. What would need to be said for this to happen? Christine Lagarde could indicate that after three rounds of easing, a pause may follow. That sentence alone could be enough for the euro to recover slightly. However, we need to look a little deeper into the market sentiment.

Today, the ECB cut rates for the third time, a move the market had been expecting. If it was anticipated, then it might have already been priced in, as markets often do. Nevertheless, after the official announcement of the meeting's results, the euro continued to decline. In my opinion, this suggests that the market no longer cares about how often or when the ECB will cut rates. The main point is that this factor hasn't been fully priced in yet, unlike the Fed's rate cuts, which the market began pricing in at the start of the year. Therefore, the euro will likely continue to decline until the market fully accounts for the entire course of monetary easing in the Eurozone. And perhaps even more, since the Fed's easing was factored in with a large margin.

General Conclusions

Based on the analysis of EUR/USD, I conclude that the pair continues to form a series of corrective structures. The unsuccessful attempt to break through the 1.1184 level indicated the beginning of a series of downward waves with targets located below the low of wave 4 in c. We can now expect the formation of at least a three-wave structure, with targets below the 0.9000 level. In my view, buyers will likely retreat in the near future, though a corrective wave is possible soon. The risk of the pattern transforming into a five-wave structure, surpassing the 1.2000 level, still exists but is becoming less likely.

On the larger wave scale, it is also evident that the wave pattern is evolving into a more complex structure. We are likely to see an upward set of waves, but its length and structure are hard to predict at this stage.

Key Principles of My Analysis:

Wave structures should be simple and clear. Complex structures are difficult to trade and often undergo changes.
If you're unsure about the market, it's better to stay out of it.
There is never 100% certainty in market direction. Always use protective Stop Loss orders.
Wave analysis can be combined with other forms of analysis and trading strategies.

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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.