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06.05.2024 05:33 PM
Analysis of EUR/USD pair on May 6th. The dollar continues to be under pressure from statistics

The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. At the moment, we observe the construction of the presumed wave 3 within wave 3 or c of the downtrend section. If this is the case, the decline in quotes will continue for quite some time, as the first wave of this section completed its construction around the 1.0450 mark. Therefore, the third wave of this trend section should end below.

The 1.0450 mark is the target only for the third wave. If the current downtrend section becomes impulsive, we can expect five waves, and the euro may decline below the 1.0000 mark. Of course, it is currently quite difficult to anticipate such a development, but over the past few years, there have been plenty of surprises in the currency market. Anything is possible.

Can the wave analysis change? It's always a possibility. However, if, since October 3 of last year, we have observed a new uptrend section, then the last downward wave does not fit into any structure, which cannot be the case. Therefore, an upward section is only possible with a significant complication of the wave analysis. Such a scenario seems unlikely, so I will proceed with the basic analysis.

Demand for the euro continues to rise.

The EUR/USD pair rate increased by 20 basis points on Monday, and the range of movements was very weak. Nothing is surprising about this, as on Mondays, the market trades sluggishly and passively as if gearing up for more important days and events. However, it is worth noting that the American currency remains under market pressure, which has persisted for several weeks. On Friday in America, reports on the labor market, unemployment, wages, and ISM business activity were released. Each of these reports turned out to be weak in its way. The definition of "weak" is highly subjective, as the market is primarily interested in the actual value of the report compared to the forecast. Therefore, the value can be very strong but still weaker than the market's expectations. And the market reacts to a strong value with currency sales.

For example, on Friday, American data was not so weak without looking at the forecasts. 175 thousand new jobs were created, unemployment rose only to 3.9% (just 0.5% above the absolute minimum), the ISM business activity index fell to 49.4 (which is bad), and wages slowed down more than expected (which is also bad for the dollar). But it's hard to call these statistics "disastrous." "Moderately weak" - yes. Today, stronger business activity indexes for April were released in the European Union, slightly supporting buyers. Overall, the strengthening of the euro has a solid foundation.

General conclusions.

Based on the analysis of EUR/USD, the construction of a downward set of waves continues. Waves 2 or b and 2 within 3 or c are completed, so I expect the resumption of constructing an impulsive downward wave 3 within 3 or c with a significant decrease in the pair. I continue to consider sales with targets around the calculated mark of 1.0462, as the news background remains on the side of the dollar. A failed attempt to break through the 1.0787 mark, which equates to 76.4% according to Fibonacci, will indicate the market's readiness for new sales.

On the larger wave scale, the presumed wave 2 or b, which in length was more than 61.8% according to Fibonacci from the first wave, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and a decrease in the pair below the 4-figure has begun to be implemented.

The main principles of my analysis:

  1. Wave structures should be simple and understandable. Complex structures are difficult to play with; they often bring changes.
  2. If there is confidence in what is happening in the market, it is better to avoid entering it.
  3. There is never 100% certainty in the direction of movement. Remember protective stop-loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
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