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22.03.2023 07:15 PM
EUR/USD. Analysis for March 22. The euro continues to grow

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The recent increase in the euro's value has caused some confusion in the wave marking on the 4-hour chart for the euro/dollar pair. We saw a dramatic decrease in quotes last week, which may be seen as the start of wave C. The decrease, however brief, was quickly followed by a rise in demand for the euro. There are now two potential outcomes as a result. Wave B will either take a five-wave corrective form or the wave pattern as a whole will shift, allowing the upward part of the trend to resume developing. The market mood has been significantly impacted by news over the past two weeks, which explains why there are occasionally unanticipated movements in the pair. Trading would likely progress more in line with the wave pattern if there were no economic data and significant US and EU banks declaring bankruptcy. Instead, we have a chance to miss the promising development of a downward wave. The only thing left to do in the current circumstances is to watch the progress.

The range of opinions on Fed rates is substantial.

On Wednesday, the euro/dollar pair rose by an additional 15 basis points. Although it may appear like there isn't much to talk about, the demand for the euro currency has been increasing for five days now. Therefore, even 15 points matter. This activity occurs right before the Fed meeting and right after the ECB meeting. In addition, there has been a great deal of other equally significant occurrences during the past two weeks, so it may have nothing to do with these particular events at all. As a result, we go into the FOMC meeting in total uncertainty. The base assumption for the market is a rate increase of 0.25 percent. For the majority of the time between the February and March Fed meetings, the market was anticipating the same outcome. However, as news of bank failures in the United States spread, Jerome Powell delivered a statement to the US Congress in which he promised a probable acceleration of the rate hike, followed by a new stimulus program, all of which stunned market participants and analysts. The market is anticipating a decision on the rate in the range of minus 25 basis points to plus 50 just a few hours before the results are announced. And you can discover your arguments in favor of each.

Powell's statement to Congress and the fact that the ECB increased the rate by 50 basis points both support a 50 basis point hike. Although there is a banking crisis in Europe as well, the European regulator nonetheless took a "hawkish" stance. It claims that a 25-point increase is the most neutral course of action. The Fed's caution throughout the banking crisis supports the absence of rate adjustments. A 25-point rate reduction can also hasten the financial system's recovery. I anticipate the Fed raising the rate by 25 basis points, and I view all other possibilities as doubtful. Nevertheless, they shouldn't be disregarded.

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Conclusions in general.

I draw the conclusion that the upward trend section's development is finished based on the analysis. As a result, it is still possible to take into account sales with targets close to the predicted mark of 1.0284, or 50.0% Fibonacci. A corrective wave 2 or b can still be developed at this point; however, it will now take a longer form. Opening sales now on the MACD "down" signals is advised.

On the older wave scale, the upward trend section's wave pattern has grown longer but is likely finished. The a-b-c-d-e pattern is most likely represented by the five upward waves we observed. The downward trend's development has already started, and it might have any size or structure.

Chin Zhao,
Analytical expert of InstaForex
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