The wave marking of the 4-hour chart for the euro/dollar instrument has not changed for more than a month and after another week nothing new can be added to it. All this time, the horizontal movement continues and at the moment it is not even possible to say for sure whether the construction of the proposed wave d has been completed. The entire wave from November 24 may be both wave d, after which the construction of wave e-C will begin, and the first wave of a new upward (or corrective) trend segment, which has taken on a rather complex form. This is exactly the problem of corrective waves or trend sections. They can become more complicated and take almost any form. Even the breakthrough of the last local peak did not lead to clarity on the issue of the proposed wave d. At the moment, I am inclined to think that the construction of the downward trend section will continue – we have been seeing too uncertain an increase in quotes in recent weeks. However, in any case, the proposed wave d may take on an even more extended and complex form.
Inflation in Europe continues to rise.
The euro/dollar instrument rose by 70 basis points on Friday. Considering how strong the news background was this day, I am surprised that the instrument passed only 70 points and not more than twice. It is the news background that should be carefully considered since both the European Union and the United States have published reports that are important for analyzing the state of economies. Let's start with the Eurozone. The consumer price index rose from 4.9% to 5.0% y/y. It would seem that the increase is quite small, but it is still an increase in prices. It would be more correct to say: the acceleration of price growth. Inflation in the EU remains lower than in the US, where this indicator is already about 7%, but still, 5% is also a lot. The demand for the euro currency, although it did not grow (although it could), still the markets ticked this report in their heads. I also note that the basic consumer price index did not change in December, remaining at 2.6%. On the one hand, such high inflation would have to support the demand for the euro currency. The logic is simple: the higher the inflation, the sooner the ECB will move to measures to limit it. It is unlikely that the central bank will simply observe that prices are rising and do nothing. Since six months ago, the Fed and the ECB have taken a similar position on this issue, preferring to simply wait for inflation to slow down without active actions from the regulator. However, this approach has not yielded positive results. Therefore, the Fed, under market pressure, began to curtail the QE program and is preparing to raise rates. But the current state of the economy, which has already fully recovered after the crisis, allows it to do this. But things are worse in Europe, so an increase in inflation does not guarantee that the ECB will take measures to contain it, since the economy still needs financing and stimulation in order not to lose growth rates.
General conclusions.
Based on the analysis, I conclude that the construction of the descending wave C can be completed. However, the internal wave structure of this wave still allows the construction of another downward, internal wave. Thus, I advise selling the instrument with targets located around the 1.1152 mark until a successful attempt to break the peak of wave d occurs. A restrictive order can be placed above the peak of wave d. You can open one trade, as the MACD turns down quite often.
