The wave counting on the 4-hour chart for the Euro/Dollar instrument remains rather controversial and downright complex. The retreat of the quotes from the lows reached made it possible to assume that the downward wave c, and with it the entire downward trend section, is completed. However, the decline in quotes continues, which means that the expected wave c continues its construction. As I said, even if all the waves are identified correctly, it is very difficult to trade if most of the waves do not exceed 100-120 points in size and the upward and downward waves are constantly alternating.
Any wave in the current wave structure can take on a more complex form almost at any moment, therefore, wave counting does not answer the question of how long the instrument quotes will continue to decline. In the current situation, I recommend paying closer attention to the Fibonacci levels, as well as looking for one hundred percent confirmation that the current wave/trend segment is complete. The current size of wave c is slightly smaller than wave a. Thus, we can expect a decline in quotes in the direction of the Fibonacci levels of 100.0% and 127.2%.
There was no news background for the Euro/Dollar instrument on Monday and Tuesday. The markets had absolutely nothing to analyze. Thus, the decline in quotes was taking place under the general trend currently prevailing in the market. If you look closely, it becomes clear that the European currency is declining very slowly. This means that the markets do not sell the euro in large volumes, as is the case with impulse areas. Therefore, the current site is still characterized as correctional. The probability that the quotes of the instrument will fall below the minimum of the previous downward trend section of the trend is low. This week the ECB meeting may help the European currency. But it can also create new barriers to the rise of the euro.
Everything will depend on what ECB President Christine Lagarde informs the market. Markets do not believe that the European regulator will reduce the pace of buying assets from the open market. And even more so, we are not talking about raising the key rate. Therefore, it will all come down to Christine Lagarde's speech. Unfortunately for the euro, its rhetoric in recent weeks has been dovish, so there is little chance of a drastic change towards the hawks. Lagarde will probably again talk about the high risks of the fourth wave of the pandemic and the fragile state of the European economy, which still needs incentives. In this case, the European currency may continue to decline moderately. If Lagarde announces an increase in the rate of asset purchases, then the euro may decline another 100 points this week.
Based on the analysis, I conclude that the construction of the downward wave c can be completed in the near future. However, wave c is constantly getting more complicated, so I recommend waiting on a decline to the 100.0% Fibonacci level and the ECB meeting, after which the instrument's dynamics for the near future will become clear. An unsuccessful attempt to break the 1.1704 mark may indicate the end of the entire downward trend.
The wave counting of the new downward trend section is not entirely unambiguous, but at this time it is presumably completed or nearing its completion and has assumed a three-wave structure. Thus, now I am expecting a new low of the three-wave upward trend.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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