Forex Analysis & Reviews: 20.06.2024 - Analysis of EUR/USD pair on...

20.06.2024 05:06 PM

Analysis of EUR/USD pair on June 20th. The risks to the European economy remain balanced

The wave pattern on the 4-hour chart for EUR/USD remains unchanged. Currently, we are observing the formation of the presumed wave 3 in 3 or C of a downward trend. If this is accurate, the decline in quotes will continue for a considerable time, as the first wave of this segment completed around the 1.0450 mark. Therefore, the third wave of this trend segment should end lower, even if it doesn't take an impulsive form.

The 1.0450 mark is the target for the third wave. If the current downward trend becomes impulsive, we can expect a total of five waves, and the euro may fall below 1.0000. While it's challenging to anticipate such a development right now, the currency market has delivered plenty of surprises in recent years.

An alternative scenario is transforming wave 3 or C into a corrective pattern with five waves of the a-b-c-d-e type. Even in this case, the low of wave 3 or C should be below the low of wave 1 or A. Therefore, if wave E in 3 or C is currently forming instead of 3 in 3 or C, the pair's decline should continue.

The euro is calmly and slowly correcting

The EUR/USD rate decreased by 20 basis points on Thursday, with minimal price movement. There are still about seven hours left in the day, so the pair's rate could change more significantly. However, the news background today is as weak as it has been all week. Therefore, expecting the market to become more active suddenly is naive. Although we observe more active movements during American sessions than European or Asian ones, activity is a relative term.

Today, I can only note the European Central Bank's bulletin, which stated that the European economy faces no immediate threats. The risks are balanced, the Governing Council is determined to return inflation to 2% and will keep interest rates in "restrictive territory" for as long as it takes to achieve this goal. The bulletin notes that the EU economy showed growth of 0.3% after five quarters of stagnation, and inflation continues to slow down in all respects. However, domestic inflation remains high.

Based on all the above, the euro had no reasons for concern today. Ahead, we have reports from the US on business activity in Philadelphia, building permits, and initial jobless claims. These data are unlikely to impact market sentiment on Thursday significantly.

General Conclusions

Based on the EUR/USD analysis, the downward wave formation continues. In the near future, I expect the formation of the descending wave 3 or C to continue with a significant decline in the pair. I continue to consider only selling positions with targets around the estimated 1.0462 mark. The internal wave structure of wave 3 or C may take on a five-wave corrective form, but even in this case, quotes should fall into the 1.04 area.

In the larger wave scale, it is visible that the presumed wave 2 or B, which in length amounted to more than 76.4% of Fibonacci from the first wave, may be complete. If so, the scenario of wave 3 or C formation and the pair's decline below the 1.04 level is still unfolding.

Key Principles of My Analysis:Wave structures should be simple and understandable. Complex structures are difficult to play out and often change.If uncertain about market conditions, it's better to avoid entering the market.There is never 100% certainty in market direction. Always use protective Stop Loss orders.Wave analysis can be combined with other types of analysis and trading strategies.

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*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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Wave analysis

Chin Zhao,
Experto analítico de InstaForex
© 2007-2025

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