Analysis of EUR/USD on April 12. The dollar collapsed on US inflation data.
April 12, 2023 4:23 pm
The wave marking of the 4-hour chart for the euro/dollar pair continues to get confusing due to the latest rising waves. These waves could be the beginning of a new bullish trend section (as the last descending one can be considered three-wave and completed), but at the same time, this trend section may end very soon if it also takes on a three-wave form. Thus, the wave picture for the euro currency may become very complex, and it isn’t easy to work with it now. At the current positions, the formation of the bullish wave set may be completed as the peak of the third wave has gone beyond the peak of the first. We saw the same thing in the last downward formation. At the same time, there are other options for wave analysis. It is advisable to rely on the scenario with the pair’s increase because the supposed wave c (of the descending wave set) was weak. Consequently, buyers are stronger than sellers, and the ascending wave c may extend more. The nearest target is suggested to be the peak of wave e, which corresponds to 1.1033.
The holidays are over.
The euro/dollar pair on Wednesday fell by 80 basis points. By the end of the day, the dollar’s decline may be even stronger, but at the time of writing the article, the losses amount to 80 points. For most of the day, the market moved very sluggishly, but after the release of the US inflation report, demand for the dollar dropped sharply. The US consumer price index fell by 1% in March: from 6% to 5%. This is the strongest slowdown in a single month since the beginning of the inflation decline about nine months ago. Thus, the market reaction eloquently suggests that inflation data is still important. The dollar’s decline is related to the fact that the Federal Reserve may abandon raising interest rates at the next meeting in May after this report. At the same time, the ECB will continue to tighten monetary policy, as inflation in the EU remains much higher than in the American one. This is causing a new decline in the dollar’s value relative to the euro.
However, I would also like to point out the core inflation indicator, which rose for the first time in 5 months: from 5.5% to 5.6%. The acceleration is not too strong, but at the same time, it is a bad sign. Core inflation has long been more concern for FOMC members than the main indicator, showing a much weaker slowdown. Based on this, at some point, the Fed may decide on new tightening based specifically on the core indicator. Core inflation is higher than the main one, which looks strange and unusual. The dollar has declined fairly today, but it will only sometimes be like this. It still needs to be too early to consider the rate hike in the US completed. What will happen in the European Union is still being determined. The core inflation problem is also present there.
General conclusions.
Based on the analysis, the formation of a bullish trend section continues, which may take only a three-wave form and end soon. Therefore, now both sales and purchases can be equally advised. The news background does not answer which direction the pair will most likely move. Wave analysis is the same. I recommend cautious purchases with targets around the 1.1033 mark in the current situation. An unsuccessful attempt to break through the 1.1033 mark will indicate the market’s readiness to build a descending wave set.
On the older wave scale, the wave analysis of the ascending trend section has taken an extended form, but it is likely completed. We saw five waves up, which are most likely the structure of a-b-c-d-e. The formation of the bearish trend section may still need to be completed, and it can take any form in terms of structure and length.
The material has been provided by InstaForex Company – www.instaforex.com
The wave marking of the 4-hour chart for the euro/dollar pair continues to get confusing due to the latest rising waves. These waves could be the beginning of a new bullish trend section (as the last descending one can be considered three-wave and completed), but at the same time, this trend section may end very soon if it also takes on a three-wave form. Thus, the wave picture for the euro currency may become very complex, and it isn’t easy to work with it now. At the current positions, the formation of the bullish wave set may be completed as the peak of the third wave has gone beyond the peak of the first. We saw the same thing in the last downward formation. At the same time, there are other options for wave analysis. It is advisable to rely on the scenario with the pair’s increase because the supposed wave c (of the descending wave set) was weak. Consequently, buyers are stronger than sellers, and the ascending wave c may extend more. The nearest target is suggested to be the peak of wave e, which corresponds to 1.1033.
The holidays are over.
The euro/dollar pair on Wednesday fell by 80 basis points. By the end of the day, the dollar’s decline may be even stronger, but at the time of writing the article, the losses amount to 80 points. For most of the day, the market moved very sluggishly, but after the release of the US inflation report, demand for the dollar dropped sharply. The US consumer price index fell by 1% in March: from 6% to 5%. This is the strongest slowdown in a single month since the beginning of the inflation decline about nine months ago. Thus, the market reaction eloquently suggests that inflation data is still important. The dollar’s decline is related to the fact that the Federal Reserve may abandon raising interest rates at the next meeting in May after this report. At the same time, the ECB will continue to tighten monetary policy, as inflation in the EU remains much higher than in the American one. This is causing a new decline in the dollar’s value relative to the euro.
However, I would also like to point out the core inflation indicator, which rose for the first time in 5 months: from 5.5% to 5.6%. The acceleration is not too strong, but at the same time, it is a bad sign. Core inflation has long been more concern for FOMC members than the main indicator, showing a much weaker slowdown. Based on this, at some point, the Fed may decide on new tightening based specifically on the core indicator. Core inflation is higher than the main one, which looks strange and unusual. The dollar has declined fairly today, but it will only sometimes be like this. It still needs to be too early to consider the rate hike in the US completed. What will happen in the European Union is still being determined. The core inflation problem is also present there.
General conclusions.
Based on the analysis, the formation of a bullish trend section continues, which may take only a three-wave form and end soon. Therefore, now both sales and purchases can be equally advised. The news background does not answer which direction the pair will most likely move. Wave analysis is the same. I recommend cautious purchases with targets around the 1.1033 mark in the current situation. An unsuccessful attempt to break through the 1.1033 mark will indicate the market’s readiness to build a descending wave set.
On the older wave scale, the wave analysis of the ascending trend section has taken an extended form, but it is likely completed. We saw five waves up, which are most likely the structure of a-b-c-d-e. The formation of the bearish trend section may still need to be completed, and it can take any form in terms of structure and length.
The material has been provided by InstaForex Company – www.instaforex.com
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