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The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have seen only three large-scale wave structures that constantly alternate with each other. At the moment, the construction of another three-wave structure continues – a downward one, which began on July 18th of last year. The presumed wave 1 is completed, wave 2 or b has become more complex three or four times, but is now also completed.
The upward segment of the trend may still be resumed, but its internal structure would be unreadable in this case. I remind you that I try to identify unambiguous wave structures that do not tolerate ambiguous interpretations. If the current wave analysis is correct, then the market has moved on to forming wave 3 or c since December 28th. At the moment, wave 2 in 3 or c is presumably completed. If this is indeed the case, the decline in quotes will continue. An unsuccessful attempt to break through the level of 1.0956, which equates to 50.0% according to Fibonacci, also indicates the completion of the corrective wave.
Lagarde confirmed that inflation will continue to slow down.
The EUR/USD pair rate decreased by another 25 basis points on Wednesday. In recent weeks, market activity has been very low, almost every day we observe movement amplitudes not exceeding 25 points, and sometimes even less. Nevertheless, it is simply necessary to admit that at the moment the market is trading inactively and adjusting to the current conditions. Alternatively, you can wait for activity to increase again, because the current values are very low.
Today, the decline in demand for the European currency did not happen out of nowhere. ECB President Christine Lagarde, speaking in the first half of the day, confirmed her previous statements and assured that inflation in the eurozone will continue to decline. This means that the expected timing for the first interest rate cut remains unchanged in the EU, while in the US they are increasingly being pushed forward. Based on this, we have some divergence, which is constantly increasing not in favor of the euro. If you imagine the market's initial expectations for the timing of policy easing in the US and the EU as two points, then initially these points were getting closer, but now they are moving away from each other, as many economists believe that the Fed will move to rate cuts much later than June. I remind you that at the beginning of the year, the market was expecting the easing process to start in March.
In my opinion, such news background cannot but support the US currency. Inflation in the US is not decreasing, while in the EU it is approaching the target level. Everything speaks in favor of the pair continuing to decline, as required by the wave pattern.
General conclusions.
Based on the analysis of EUR/USD, I conclude that the construction of a downward set of waves continues. Wave 2 or b has taken on a completed form, so in the near future, I expect the continuation of building an impulse downward wave 3 or c with a significant decrease in the pair. Currently, an internal corrective wave is being built, which could have already been completed. I continue to consider only sales with targets around the calculated level of 1.0462, which corresponds to 127.2% according to Fibonacci.
On a larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci from the first wave, may have been completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and the decline in the pair below the 4th figure has begun to be implemented.
The main principles of my analysis:
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