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23.07.2024 07:47 PM
Analysis of EUR/USD pair on July 23rd: Calm in the Currency Market

The wave pattern on the 4-hour chart for the EUR/USD pair has taken on a slightly different form. If we analyze the entire trend section that began in September 2022, when the European currency fell to 0.9530, we are within an upward set of waves. However, even within this section, it is challenging to distinguish higher-scale waves. In other words, there needs to be a clear, impulsive trend. We constantly observe alternating three-wave and five-wave corrective structures. Even now, the market has failed to build a clear three-wave decline from the peak in July last year. Initially, there was a downward wave that overrode the lows of previous waves, followed by a deep upward wave, and now, for the seventh consecutive month, something unclear is being formed.

Since January 2024, I can only highlight two a-b-c three-wave structures with a reversal point on April 16th. Therefore, the first thing to understand is that there is no current trend. After the completion of the current wave, a new three-wave downward structure may begin. The trend section from April 16th could take on a five-wave form but still be corrective. Under such circumstances, I cannot believe in the prolonged growth of the euro.

The Market is Ready for Sales

The EUR/USD pair decreased by 30 basis points on Tuesday, which is likely a collapse of the European currency. I remind you that the wave pattern had to be slightly adjusted, and now it suggests the formation of at least one deep corrective wave. Therefore, based solely on the wave factor, my readers can expect a significant decline in the European currency. In recent weeks, the demand for the euro increased against the backdrop of the ECB's easing monetary policy, which is completely inconsistent. Based on this (and considering the sideways factor visible on the charts), the decline has begun and will continue.

I won't hide it; I did not expect the euro to rise almost to the 10th figure. However, predicting the completion of a wave or a set of waves with an accuracy of 50 points is practically impossible. Ultimately, the reversal may occur only 100 points above what I expected. The market previously considered the news background in a very specific way, so it will not likely hinder the dollar's appreciation. The upward wave may still need to be fully built, but at the same time, the reversal is approaching. There was no news background on Monday and Tuesday, but the market still reduced the demand for the EU currency. This means it is morally ready for sale.

General Conclusions

Based on the analysis of EUR/USD, I conclude that the pair has moved to building a series of corrective structures. From the current positions, the increase may continue within a three-wave or five-wave corrective structure. Therefore, it is impossible to clearly define the targets for the euro's increase right now. The pair could reach the 10th figure, where waves a and c equalize. Then, a downward wave d may follow. It is also possible to build a new downward (and also corrective) series of waves with targets around the 6th figure.

On the higher wave scale, it is also evident that the wave pattern is becoming more complex. We are likely to see an upward set of waves, but its length and structure are difficult to imagine at this point.

Basic Principles of My Analysis:

  1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often change.
  2. If there is no confidence in what is happening in the market, it is better not to enter it.
  3. There can never be 100% confidence in the direction of movement. Do not forget about protective stop-loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
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