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29.07.202119:46 Forex Analysis & Reviews: Wave analysis of EUR/USD for July 29. Fed: no hope of tightening

Exchange Rates 29.07.2021 analysis

The wave counting of the 4-hour chart for the Euro/Dollar instrument has finally acquired a more readable and complete look. After the instrument spent several weeks with a minimum amplitude, yesterday the demand for the US dollar decreased, which allowed the increase to begin. Thus, at the moment, the proposed wave c is considered completed. If this assumption is correct, then the increase in quotes has begun and will continue as part of the construction of a new upward trend section, which can take both a corrective and an impulse form. In any case, I expect an increase to the levels of the peaks of the previous wave c. That is, to the level of 1.2240. There are practically no alternative options now. The wave structure a-b-c looks quite convincing, although the internal structures of each of its waves are practically unreadable. I have already said earlier that the main thing is not the accuracy of the wave count, but its clarity for traders. Now the main assumption is that the downward section of the trend has completed its construction.

There was no news background for the Euro/Dollar instrument on Thursday, and in the evening the Fed announced the results of its meeting. Without going into details, the rate remained unchanged at 0.25%, and the asset purchase program will still amount to $120 billion per month. Thus, the main parameters of monetary policy have not changed. At the press conference, the Fed chairman noted several rather important things. Powell said that the Fed does not intend to fight inflation by raising rates. Inflation itself may continue to remain at high levels for a few more months or a little more, but Powell could not name the exact time when it will begin to decline. The Fed chairman also noted that inflation is caused by rising prices for individual goods and services and is not related to the entire US economy.

The main increase in prices is noted for new and used cars, plane tickets, hotel rooms and some other categories of goods and services. Powell explained this effect by lifting quarantine restrictions, which led to a sharp recovery of the most affected sectors of the economy during the pandemic. It is these sectors that are currently providing high inflation. Powell also expressed the hope that the delta strain of coronavirus will not have a destructive impact on the economy, like the previous waves. However, the head of the Fed refrained from making forecasts on this issue. Powell also noted the high vaccination rates, which gives hope for a bright future. Thus, I can say that the Fed has taken a very cautious position and will continue to wait for the full or maximum possible recovery of the economy before starting to tighten monetary policy. Or at least announce it.

Based on the analysis, I conclude that the construction of the downward wave c is completed. Thus, as I said earlier, it is now possible to buy the instrument with goals located near the nearest Fibonacci levels. These levels are 1.1919 and 1.1983. I also recommend making purchases for each new MACD signal "up".

Exchange Rates 29.07.2021 analysis

The wave counting of the higher scale looks quite convincing. We see three three-wave sections of the trend, which are approximately the same in size. This gives reason to assume that the last downward trend section is really completed. If this is true, then we can expect an increase in the quotes of the instrument in the coming weeks by 200-300 basis points.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Chin Zhao,
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