21.05.202417:48 Forex Analysis & Reviews: Analysis of the EUR/USD pair on May 21, 2024

The wave pattern on the 4-hour chart for EUR/USD remains unchanged. We are observing the construction of the presumed wave 3 in 3 or C of a downward trend segment. If this is the case, the decline in quotes will continue for quite some time, as the first wave of this segment concluded around the 1.0450 mark. Therefore, the third wave of this trend segment should conclude below this level.

The 1.0450 mark is only the target for the third wave. If the current downward trend segment turns out to be impulsive, we can expect five waves, potentially driving the euro below the 1.0000 mark. Admittedly, it isn't easy to anticipate such an outcome, but the forex market has delivered plenty of surprises in recent years. Anything is possible.

Is there a chance of a change in the wave pattern? There always is. However, if we have been observing a new upward trend segment since October 3 of last year, the previous downward wave doesn't fit into any structure. Therefore, an upward segment is possible only with significant complications of the wave pattern. In recent weeks, the pair has only been increasing, threatening the integrity of the wave picture.

The 1.0880 mark is currently holding back buyers.

On Tuesday, the EUR/USD rate decreased by 15 basis points. The overall retreat from the peaks reached last week is only a few dozen points, which is obviously too little to indicate the end of the upward wave observed over the past month. Since I cannot yet conclude that this wave is complete, a breakthrough at 1.0880 remains possible, which would necessitate adjustments to the current wave pattern. Clearly, no one wants this scenario.

However, at the moment, the 1.0880 mark continues to hold off buyers. Unfortunately, sellers are doing almost nothing to start forming a new downward wave, which should be impulsive and drive the pair below the 1.0600 level. Today, FOMC members reiterated that, at best, the regulator will conduct two rounds of monetary easing in 2024. They again cited too high inflation, slow deceleration, and a strong economy. Therefore, the Fed remains as far from the first round of easing now as it was before the release of the April inflation report, which caused the fall of the U.S. dollar.

In the current situation, I can only expect a decrease in demand for the euro and an increase in demand for the dollar. The 1.0880 mark will continue to act as an insurmountable barrier for buyers.

General Conclusions

Based on the EUR/USD analysis, the formation of the downward wave set continues. In the near future, I expect the resumption of the impulsive downward wave 3 in 3 or C with significant declines in the pair. I anticipate a favorable moment for new sales targeting around the estimated mark of 1.0462. A failure to break through the 1.0880 mark, equivalent to 61.8% on the Fibonacci retracement, may indicate the market's readiness for new sales.

On a larger wave scale, it is evident that the presumed wave 2 or B, which exceeded 61.8% on the Fibonacci retracement of the first wave, may be complete. If so, the scenario of forming wave 3 or C and lowering the pair below the 1.0400 level has begun to materialize.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are hard to play out and often change.
2. If uncertain about market developments, it's better to avoid entering.
3. There can never be absolute certainty in the direction of movement. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.