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09.07.2024 04:54 PM
Analysis of EUR/USD pair on July 9th. The market is waiting for Powell's speech

The wave pattern on the 4-hour chart for the EUR/USD instrument remains unchanged. Currently, we observe the construction of the supposed wave 3 in 3 or C of the downward trend segment, which is very complex. If this assumption is correct, the decline in quotes will continue for quite a while, as the first wave of this segment finished its construction around the 1.0450 mark, considering market activity. The third wave of this trend segment should finish lower, even if it doesn't take an impulsive form.

The 1.0450 mark is the target only for the third wave. If the current downward trend segment takes an impulsive form, we are looking at a total of five waves, and the euro could fall below the 1.0000 mark. In recent weeks and months, such a scenario seems unrealistic, and the wave pattern may become more complex.

The alternative scenario I see now is the transformation of wave 3 or C into a corrective form with five waves of type a-b-c-d-e. Even in this case, wave 3 or C should be lower than the low of wave 1 or A. Therefore, if the construction of wave E in 3 or C has started now, not 3 in 3 or C, then the instrument's decline should still resume.

The market is not in a hurry to turn down

The EUR/USD rate decreased by 6 basis points on Tuesday as of the start of the American session. Around this time, Jerome Powell is speaking before Congress in America, so market activity may increase in the next few hours. However, I am not sure of that. The market is waiting for specific statements from Powell regarding the timeline for the start of monetary policy easing. If the Fed Chair does not clearly state this or outline the conditions under which the rate might begin to decrease, there will be no market reaction.

Recall that Powell again stood out with "vague" rhetoric in his last speech. He stated that the Fed "may start lowering the rate," but "more data is needed to be confident in achieving 2% inflation." We've heard such statements from Powell and his Fed colleagues for 6-7 months. Also, remember that at the beginning of the year, the market expected a shift to a more "dovish" policy "within a couple of months." Therefore, new statements from Powell in a similar style are unlikely to affect the EUR/USD rate. Unfortunately, maintaining "hawkish" rhetoric also does not guarantee increased demand for the US dollar, which is now crucial for the current wave pattern. Powell's speech is very important, but it all depends on what he says.

General Conclusions

Based on the EUR/USD analysis, the construction of the downward set of waves continues. In the near future, I expect the resumption of the construction of the descending wave 3 in 3 or C. I consider only sales with targets around the calculated mark of 1.0462. Still, the current wave structure is very complex and has very deep corrective waves, which should be considered. It may be complicated several more times in the near future, but I see no reason to expect the construction of an upward set of waves at the moment.

On the higher wave scale, the supposed wave 2 or B, which in length amounted to more than 76.4% 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 C and the instrument's decline below the 1.0400 figure continues to be realized.

The main principles of my analysis:

  1. Wave structures should be simple and clear. Complex structures are difficult to play out; they often change.
  2. If there is confidence in what is happening in the market, it is better to avoid entering.
  3. There can never be 100% certainty in the direction of movement. Remember protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
Chin Zhao,
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