The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Currently, we observe the construction of the presumed wave 3 in 3 or c from the downtrend section. If this is indeed the case, the decline in quotes will continue for quite some time, as the first wave of this section completed its construction near the 1.0450 mark. Therefore, the third wave of this trend section should end below.
The market slowly reduces demand for the euro, although the news background fully supports the US dollar. An unsuccessful attempt to break through the 1.0955 level, which equates to 61.8% Fibonacci, indicated the completion of the construction of wave 2 in 3 or c. Therefore, there is potential for a decline in the pair, and it is significant.
Is there a probability of a different wave analysis? There is always a possibility. However, if since October 3 of last year, we have observed a new uptrend section, then the last downtrend wave does not fit into any structure, which cannot be. Therefore, an upward section is possible only with a strong complication of the wave analysis.
The euro remains in an unfavorable position due to the news background.
The EUR/USD pair rose by 20 basis points on Wednesday, but the movement in the pair has been horizontal for the third day in a row. We are not inside the third wave in 3 or c from the downtrend section. If this is true, the decline in the quote will continue anyway. However, the market can only reduce or increase demand sometimes. Sometimes, there are days like today or yesterday when the market is calm.
It is strange, but today or yesterday, the market had compelling reasons to continue buying the US currency. On Tuesday evening, Federal Reserve Chairman Jerome Powell spoke; this was brief and concise: the US economy and labor market are strong, but progress on inflation has stalled.
In my recent reviews, I have repeatedly said that we need to remember the FOMC interest rate cut in June. I said this even before the last inflation report indicated a new acceleration. The market has abandoned this idea (according to the CME FedWatch tool), and even Jerome Powell speaks of a lack of progress in reducing consumer prices. However, not so long ago, he noted the progress of 2023 and expected further slowing of price growth. And if there is no progress, then there is no reason to lower rates either. I feel that those analysts who expect a transition to a more "dovish" policy no earlier than December 2024 are right.
General conclusions.
Based on the analysis of EUR/USD, the construction of a bearish wave set continues. Waves 2 or b and 2 in 3 or c are completed, so in the near future, I expect the continuation of the construction of an impulsive downward wave 3 in 3 or c with a significant decrease in the pair. I continue to consider selling with targets around the calculated mark of 1.0463, as the news background remains on the side of the dollar. The necessary sell signal near the 1.0880 mark was formed (an unsuccessful attempt to break through).
On a larger wave scale, the presumed wave 2 or b, which in length exceeded 61.8% Fibonacci from the first wave, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and a decrease in the pair below the 4-figure has begun to be implemented.
The main principles of my analysis are:
- Wave structures should be simple and understandable. Complex structures are difficult to play, and they often change.
- If there is confidence in what is happening in the market, it is better to avoid entering it.
- There is never a hundred percent certainty in the direction of movement. Remember protective stop-loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
