16.03.2023 07:19 PM
EUR/USD. Analysis for March 16, 2023

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The 4-hour chart for the euro/dollar pair still shows the same wave pattern, which is excellent because it allows us to predict how the situation will develop. It's also encouraging that the movements are almost entirely in line with the wave analysis. The upward part of the trend, which has taken on the pattern a-b-c-d-e, is already finished. I continue to anticipate the pair to decline since, if the wave pattern for the current wave is accurate, we should build at least three waves down. Two of these three waves may already be finished. The proposed wave b, which is currently nearing completion once more or has already been completed, has become more complicated as a result of the most recent increase in quotes. But, I must point out that the movement on Friday has significantly complicated the wave picture. Now that quotes are increasing, the current wave scenario can still happen, but there is a risk that the pattern of the current wave will change, which we would prefer to prevent. For the time being, I continue to anticipate that the pair will continue to decrease, with targets close to the predicted mark of 1.0283, or 50.0% Fibonacci. To determine if the market may continue developing a downward trend section after working off this level, it will be required to assess the scenario and the wave image.

On Thursday, the euro/dollar pair increased by 25 basis points. The pair's amplitude during the day was around 40 points, which isn't much considering the day's news background. Let me remind you that the ECB announced an interest rate decision a few hours ago that is expected to have increased the rate by 50 basis points. I'd also like to point out that this choice has been known for a while. The rate will increase by 50 points in March and by 25 points in May, according to repeated statements made by Christine Lagarde, Luis de Guindos, and other ECB members. Also, they have discussed a longer rate hike in recent weeks. Based on this, no one should have been surprised by the regulator's conclusion.

On Monday, the market started to panic and change its forecasts for the Fed and ECB rates. Let me remind you that over the weekend, news broke about the failure of three US banks, followed by reports of financial issues at the Swiss bank Credit Suisse. The ECB started to anticipate a more gradual tightening of monetary policy as the market instantly reduced its estimates for the Fed rate almost to zero. As we can see, these expectations were unfounded because the regulator still considers the issue of excessive inflation to be much more important than the difficulties (and not the failure) of a European bank. The response was extremely controlled because the decision was anticipated. The wave pattern still preserves its previous appearance. The drop in demand for the euro is still something I predict, giving wave c a stronger appearance.

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Conclusions in general.

I draw the conclusion that the upward trend section's development is finished based on the analysis. As a result, it is now allowed to take into account sales with targets close to the predicted mark of 1.0284, or 50.0% Fibonacci. A corrective wave 2 or b can still be developed at this point; however, it will now take a longer shape. Opening sales now on the MACD "down" signals is advised.

On the older wave scale, the upward trend section's wave pattern 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. The downward trend's development has already started, and it might have any size or structure.

Chin Zhao,
Especialista em análise na InstaForex
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