As a result of today's decline of about 200 basis points, the wave markings on the 4-hour chart of the euro/dollar instrument have grown more complicated. Consequently, a successful attempt was made to surpass the Fibonacci level of 261.8%, which was also the low of the waves E and b. It is already evident that these waves are likely not E and b, but the current market sentiment is gaining prominence. A few days ago, we had a fantastic, promising wave pattern consisting of a five-wave descending structure. Instead of constructing at least three upward correction waves, the market opted to resume selling the instrument, indicating the secondary importance of wave analysis at this moment. Occasionally, the market completely disregards the waves. However, I want to remind you that the market frequently disregards the news background and numerous technical signs. The key is to recognize that this has occurred promptly and adapt to the new market circumstances. Now that one corrective wave has been identified with a red line, the instrument may construct a new five-wave falling series. On a broader scale, the wave markup appears unintelligible. Thus I propose focusing on the lowest wave order presently.
The euro currency began the week with optimism, which rapidly disintegrated.
Tuesday saw a decline of 140 basis points in the euro/dollar exchange rate relative to the day's opening price. There was no news context on Monday, and on Tuesday, the business activity index in the European Union's services sector declined from 56.1% to 53.3% in June. Such a significant decline could reduce demand for the euro currency, but not to the extent that the instrument breaks the wave marking or falls by 140 points, in my opinion. In the end, business activity is not a report on the Gross Domestic Product, inflation, or a meeting of the ECB or Fed. I believe it has everything to do with the gloomy market sentiment, which persists unabatedly. If this is accurate, the news environment may not affect market sentiment in the coming weeks when the following five-wave descending structure is being constructed. As evidenced by the beginning of the week, the rhetoric about an American recession did not influence the market's willingness to increase dollar demand. Therefore, why pay attention to the news background if the tool is heading in one direction? A report on retail sales will be revealed in the European Union tomorrow, but I have a feeling that neither the market nor investors will care. The ISM index is more significant for the US services sector, but the euro can only count on a tiny rebound in the context of a new segment of a downward trend.
Based on the analysis, I conclude that the building of the segment with the declining slope has resumed. If so, it is now viable to sell the instrument with goals at the estimated 0.9988 level, which corresponds to the Fibonacci level of 323.6%, for each "down" MACD signal, based on the development of wave 3. A successful attempt to surpass the level of 261.8% signals the market's readiness for stronger instrument sales and the cancellation of the scenario involving the creation of rising structures.
Analytical expert of InstaForex