31.07.202417:30 Forex Analysis & Reviews: Analysis of EUR/USD pair on July 31. The Dollar Came Under Pressure Twice

The EUR/USD rate increased by 30 basis points on Wednesday, and I see nothing critical in this for the U.S. currency. The wave pattern on the 4-hour chart for the EUR/USD pair has acquired a slightly different look. If we analyze the entire trend segment starting in September 2022, when the euro dropped to 0.9530, it turns out that we are inside an upward wave set. However, even waves of a higher scale are difficult to identify within this segment. In other words, there is no clear impulse trend. We constantly observe alternating three-wave and five-wave corrective structures. For instance, the market still needs to build a clear three-wave decline from the peak last July. First, there was a wave down that covered the lows of previous waves, followed by a deep wave up, and now, for the seventh consecutive month, something unclear is forming. Since January 2024, I can only identify two three-wave a-b-c patterns with a reversal point on April 16. Therefore, the first thing to understand is that there is no current trend. After the current wave c is completed, the formation of a new three-wave downward pattern may begin. The trend segment from April 16 could take the form of five waves but still be corrective. Under such circumstances, I cannot believe in a prolonged rise of the euro currency.

The EUR/USD rate increased by 30 basis points on Wednesday, and I see nothing critical in this for the U.S. currency. Market activity remains very low, and the dollar physically cannot significantly worsen its position in one day. However, on Wednesday, July 31, everything seems to be against the U.S. currency. In the morning, an inflation report was released in the European Union, which recorded an acceleration of 0.1% year-on-year, reaching 2.6%. A day earlier, a similar dynamic was noted in the German Consumer Price Index. All market participants already understand that the next monetary policy easing might happen later than planned if inflation rises. Consequently, the second round of ECB rate cuts may not occur in September, which is good for the European currency. In the second half of the day, it became known that the ADP report in the U.S. was weak. The number of new jobs in the non-agricultural sector was only 122,000, while the market expected at least 150,000. The more important indicator is the Nonfarm Payrolls, which will be released on Friday. Based on this, until the evening when the FOMC meeting results are known, the demand for the U.S. currency will likely not continue declining. What happens in the evening largely depends on the final FOMC communique and Jerome Powell's statements. We will discuss this further in subsequent reviews.

General Conclusions

Based on the analysis of EUR/USD, the pair has moved to constructing a series of corrective structures. From the current positions, the increase may continue within a three-wave or five-wave corrective structure. Therefore, it is currently impossible to specify the targets for the euro's rise. The pair may reach the 1.10 level, where waves a and c will achieve equality. However, forming a downward wave d is now more likely. Building a new downward (and also corrective) wave series with targets located below the 1.06 level is also possible if the a-b-c wave series remains three-wave. On a higher wave scale, it is also evident that the wave pattern is transforming into a more complex one. We are likely to see an upward wave set, but its length and structure are hard to imagine now.

Key Principles of My Analysis

• Wave structures should be simple and clear. Complex structures are difficult to trade and often subject to changes.
• If there is no confidence in the market situation, it is better to avoid entering it.
• There can never be 100% certainty in the direction of movement. Remember protective Stop Loss orders.
• Wave analysis can be combined with other types of analysis and trading strategies.