The wave counting on the 4-hour chart is still completely understandable and does not require any additions. The supposed wave 2 as part of the new upward trend is completed, as the price has broken the previous peak of wave 1. Thus, at this time, the instrument is in the stage of building wave 3 of a new upward trend section. The departure of the instrument quotes from the highs reached suggests that wave 3 can turn out to be a pronounced five-wave structure, in contrast to wave 1 of the upward trend. At least, the last downward movement of quotes looks like an internal wave 2 in the future 3. If this assumption is correct, then already from the current levels or from the 38.2% Fibonacci level, the increase in quotes will resume within the wave 3 to 3. There are still no alternative wave counting options because there is no need for them now.
On Wednesday, the markets were eagerly awaiting the US inflation report. The consumer price index in April rose by 4.2% on an annualized basis and by 0.8% on a monthly basis. At the same time, core inflation jumped to 3.0% YoY and by 0.9% MoM. market expectations for these two indicators were much lower. For the first two hours after the release of this report, there was a semblance of panic in the markets. The quotes of the Euro/Dollar instrument first fell by 50 basis points, then rose by 80, then fell again by 60. Although the report seemed to be unambiguous and did not allow for the possibility of double interpretation.
A day earlier, FOMC member Lael Brainard said that a limited period of high inflation is unlikely to change the overall dynamics of consumer prices. The Fed, according to Brainard, will closely monitor inflation and is ready to begin to contain it at any time. Also, the FOMC representative said that the Fed expects stronger economic growth in the second quarter than in the first, but at the same time they still expect an uneven and difficult to predict recovery. Brainard also announced a good pace of recovery in the labor market. According to her, many Americans who have lost their jobs due to the pandemic want to return to it as soon as possible, and the Biden administration provides all those in need with jobs (in the last 3.5 months alone, about 1.5 million jobs were created in the United States). Now all that remains is to wait for new comments from the Fed representatives regarding the latest inflation figures. After all, the Fed cannot stay idle all the time and not react in any way to the rise in consumer prices, even if it wanted to achieve it.
Based on the analysis, I still expect the construction of an upward trend. At this time, the construction of corrective wave 2 or b could already be completed. Thus, I recommend now to buy the instrument with targets located near the 23rd figure and higher, counting on the formation of a wave 3 or c. There are no reasons to revise the current wave counting yet.
The wave counting of the upward trend section still has a fully completed five-wave form and is not going to get complicated yet. But the part of the trend, which began its construction immediately after it, took on a corrective and fully completed form. If the current wave counting is correct, then the construction of a new upward trend section has now begun and its two first waves have recently been completed.
