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The euro has been steadily rising in the last five days. However, it started to fall on Monday. This could be a normal retracement before a new rise, or it could be the start of a new wave in 3 or C. Personally, I am expecting the latter. Take note that at the moment, wave 2 has taken on a convincing appearance, and the unsuccessful attempt to break the level of 1.0956, which is equivalent to 50.0% according to Fibonacci, indicates that the market is ready to sell. I also want to point out that last week the market significantly increased demand for the euro. The news background did not necessarily contribute to the instrument's growth. Wave 2 itself took on a three-wave appearance, so it could end today.
As before, the market, analysts, and economists continue to speculate and argue about when central banks will start lowering interest rates. There is less and less intrigue around the European Central Bank. A month ago, ECB President Christine Lagarde announced that it would be appropriate to talk about monetary easing in early summer. Last week, she suggested the same thing. And over the past month, several ECB officials have also mentioned that June is a good time for the first rate cut.
On Monday, another member of the Governing Council, Peter Kazimir, also said that we should wait until June for the first rate cut. Kazimir said that the ECB should not rush to lower rates, even with the current inflation, which is falling faster than the central bank expected. "Upside inflation risks are alive and kicking," Kazimir said, so hasty conclusions should be avoided. Kazimir also believes that officials need more data to be sure that inflation has been tamed. Only in June will it be possible to confirm whether the ECB will reach the target level in the foreseeable future.
In conclusion, Kazimir also suggested that discussions about interest rate cuts should start. In my opinion, this is another dovish signal for the euro. I believe that based on the dovish sentiment of the ECB and the hawkish stance of the Federal Reserve, demand for the euro should decrease, while it should increase for the dollar.
Based on the conducted analysis of EUR/USD, I conclude that a bearish wave set is being formed. Wave 2 or b is complete, so in the near future, I expect an impulsive downward wave 3 or c to form with a significant decline in the instrument. An internal corrective wave is currently being formed, which could have already ended. I am considering short positions with targets around the level of 1.0462, which corresponds to 127.2% according to Fibonacci, and I am waiting for the end of the corrective wave.
The wave pattern of the GBP/USD instrument suggests a decline. I am considering selling the instrument with targets below the 1.2039 level, because I believe that wave 3 or c will start sooner or later. However, unless wave 2 or b ends, the instrument can still rise to the level of 1.3140, which corresponds to 100.0% according to Fibonacci. A successful attempt to break through the level of 1.2877, which is equivalent to 76.4% according to Fibonacci, will indicate that the market is ready to increase the demand for the instrument. In this case, you may consider long positions.
Wave structures should be simple and understandable. Complex structures are difficult to work with, and they often bring changes.
If you are not confident about the market's movement, it would be better not to enter it.
We cannot guarantee the direction of movement. Don't forget about Stop Loss orders.
Wave analysis can be combined with other types of analysis and trading strategies.
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