23.04.2024 05:14 PM
Analysis for the EUR/USD pair on April 23rd. Euro currency prepares for another decline

The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. At the moment, we observe the construction of the presumed wave 3 in 3 or c of the downward trend 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 around the 1.0450 mark. Therefore, the third wave of this trend section should end lower.

The market continues to slowly decrease demand for the euro currency, although, the news background fully supports the US dollar. An unsuccessful attempt to break through the 1.0955 mark, which is equivalent to 61.8% according to 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 changing the wave analysis? There is always one. However, if since October 3rd of last year, we have been observing a new upward trend section, then the last downward wave does not fit into any structure, which cannot be. Therefore, an upward section is possible only with a significant complication of the wave analysis.

Correction will not stop the downward trend.

The EUR/USD pair rate increased by 10 basis points on Tuesday. Over the past 5–6 working days, not only has market activity been minimal, but there has also been no clear direction in the movement of the pair. In other words, a new sideways movement of a local nature has formed. Both last week and this week, the news background is very weak. Throughout Tuesday and the following three days, there will be quite a few economic publications but very few important data. Essentially, the GDP report in the US is the only one of interest. All other reports can be considered secondary.

Today, data on business activity was released in the European Union. In the services sector, the index rose from 51.5 points to 52.9, much higher than market expectations. In the manufacturing sector, on the contrary, the index decreased from 46.1 points to 45.6, although the market expected an increase in this indicator. Therefore, demand for the euro currency can grow slowly. Market participants paid more attention to the services sector but, at the same time, could not completely ignore the manufacturing sector.

In Germany, the picture was very similar. The manufacturing sector increased from 41.9 points to 42.2, although the market expected an increase to 42.8. The services sector increased from 50.1 to 53.3, with much weaker market expectations. However, in general, these two indices reflected the same picture as in the European Union. The manufacturing sector remains significantly below the key 50.0 mark, so industrial production volumes will continue to decline, reducing (or not allowing) GDP volumes.

General conclusions:

Based on the analysis of the EUR/USD, the construction of a downward set of waves continues. Waves 2 or b and 2 in 3 or from are completed, so I expect the continuation of the construction of the impulsive downward wave 3 in 3 or from with a significant decrease in the pair. I continue to consider sales with targets around the calculated mark of 1.0463, as the news background remains in favor of the dollar. The necessary signal for sale near the 1.0880 mark was formed (an unsuccessful attempt to break through).

On a larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci from the first wave, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or from and the decline of the pair below the 4-figure mark has begun to be realized.

The main principles of my analysis:

  1. Wave structures should be simple and understandable. Complex structures are difficult to play; they often bring changes.
  2. If there is confidence in what is happening in the market, it is better to avoid entering it.
  3. There is never a hundred percent certainty in the direction of movement. Remember about Stop Loss protective orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
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