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31.03.2023 06:33 PM
EUR/USD. Analysis for March 31, 2023

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The last upward wave has caused more confusion with the wave analysis on the 4-hour chart for the euro/dollar pair. Given that the previous descending segment can be viewed as having completed three waves, this wave may well represent the initial wave of a new ascending trend segment, or it may simply be an internal wave of a more complicated sequence of falling waves. Everything appears to be developing a new upward trend segment so far, but the GBP/USD pair is also developing a simpler structure that anticipates another falling wave. Thus, it will be challenging to work on the wave pattern for the euro because it can be quite complex. If the development of an upward set of waves continues at this time, it can be finished at its current position because the peak of the third wave has passed the peak of the first. In the previous downward wave pattern, we observed the same thing. It is now completely confusing, although there are still choices for wave analysis. Because the anticipated wave c turned out to be extremely weak, I think it is now best to proceed with the scenario with an increase in the pair. As a result, buyers are now stronger than sellers.

The market is indecisive.

On Thursday, the euro/dollar pair increased by 65 basis points. However, all of these recent developments have very low predictive potential. The minimum three-wave pattern is finished, so an ascending series of waves can be developed right now. Eventually, after attempting to explain the euro's recent increase, analysts will turn their attention to the currency's decline. In my view, the market can create corrective patterns one at a time because it is currently unable to determine its long-term preferences. Germany published an inflation report yesterday that showed a slowdown to 7.4%. In the past, a drop in inflation in a particular nation would frequently result in a decline in the national currency because the market would instantly start to anticipate a less aggressive central bank rate hike. However, this time the European currency increased as a result of the decline in inflation, further confirming my belief that the market no longer makes choices based on the context of the news.

Additionally, it was reported that Jerome Powell informed congressmen about another interest rate rise during a private meeting. The market recently saw one price rise, and the most recent tightening in March was viewed as "dovish" by many. Although the ECB is likely to take a more hawkish stance, the euro has already risen significantly based solely on predictions. The pair will likely continue to move in three-wave patterns, which makes it more difficult for market participants to operate.

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Conclusions in general.

I draw the conclusion that the downward trend section's development is finished based on the analysis. However, the wave analysis for the euro is confused right now, making it challenging to determine where the pair is in the trend. Even after one wave up, which may be a complicated wave b, a new three-wave pattern of waves down can start to form. Therefore, based on the MACD reversals "up," I suggest cautious purchases with targets close to the 10th figure for the time being. Giving up sales is also not worth it because it is utterly impossible to rule out the possibility of restarting the development of a downward trend.

On the older wave scale, the upward trend section's wave analysis 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. It's possible that the downward trend hasn't reached its completion, and it could yet take on any shape or size.

Chin Zhao,
Analytical expert of InstaForex
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