Analysis of EUR/USD on May 4. The US reports pleased everyone, except the dollar
May 4, 2023 3:23 pm
The wave markup of the 4-hour chart for the euro/dollar pair continues to get more complicated due to the recent upward waves but has stayed the same in recent days and weeks. These waves could be an independent upward trend section (as the last downward wave can be considered three waves and completed), and it may also be nearing completion if it takes on a three-wave form. As a result, the wave picture for the euro currency can become very complex, and it isn’t easy to work with it now. At current positions, the formation of an upward wave set may end as the peak of the third wave has passed the peak of the first. The same was seen in the last downward formation (minimal update of the low and completion of the section).
At the same time, there are other options for wave markup. For example, a full-fledged five-wave (but also corrective) structure. It is advisable to rely on the scenario with a decrease in the pair because the ascending three-wave structure looks complete and finished. Therefore, a new downward three-wave structure may begin soon, but a successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
The Fed and Powell did not surprise the markets.
The euro/dollar pair rose by 65 basis points on Thursday. A slow increase in demand for the euro and a decrease in the dollar were observed throughout the day. However, if you carefully study the news background, everything should have been the opposite. However, such behavior of the pair does not surprise me anymore, as the supposed upward trend section should have completed its formation several weeks ago. But every time, there are some reasons for the demand for the US currency to fall slightly.
Yesterday, for example, the important ISM business activity index for the services sector was released in the US, which amounted to 51.9 points, with a March value of 51.2 and a forecast of 51.5. Strong report? Strong. Important? Important. But demand for the US currency did not increase. An hour earlier, the ADP report on the number of new jobs in the US was released, which was twice the market expectations – plus 296 thousand. It could also have increased demand for the dollar, which would have fully aligned with the current wave markup.
In the evening, the FOMC raised the interest rate by 25 basis points, which was not a “surprise” for anyone. And again, the dollar had an excellent opportunity to rise but did not take advantage of it. It began to grow today when the ECB raised rates by 25 basis points each, implementing the “baseline” scenario. It turns out that the dollar fell on the Fed’s “hawkish” decision, and the euro fell on the ECB’s “hawkish” decision. I base my analysis more on the wave markup than the news background, so I expect the pair to decline.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion or has already been completed. Therefore, it is now possible to advise sales, and the pair has quite a large space for a decline. Targets in the area of 1.0500–1.0600 can be considered quite realistic. With these targets, I advise selling the pair on MACD indicator reversals “down” as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.
On the senior wave scale, the wave markup of the ascending trend section has taken on an extended form but is likely completed. We saw five waves, which are most likely an a-b-c-d-e structure. The formation of the downward 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 markup of the 4-hour chart for the euro/dollar pair continues to get more complicated due to the recent upward waves but has stayed the same in recent days and weeks. These waves could be an independent upward trend section (as the last downward wave can be considered three waves and completed), and it may also be nearing completion if it takes on a three-wave form. As a result, the wave picture for the euro currency can become very complex, and it isn’t easy to work with it now. At current positions, the formation of an upward wave set may end as the peak of the third wave has passed the peak of the first. The same was seen in the last downward formation (minimal update of the low and completion of the section).
At the same time, there are other options for wave markup. For example, a full-fledged five-wave (but also corrective) structure. It is advisable to rely on the scenario with a decrease in the pair because the ascending three-wave structure looks complete and finished. Therefore, a new downward three-wave structure may begin soon, but a successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
The Fed and Powell did not surprise the markets.
The euro/dollar pair rose by 65 basis points on Thursday. A slow increase in demand for the euro and a decrease in the dollar were observed throughout the day. However, if you carefully study the news background, everything should have been the opposite. However, such behavior of the pair does not surprise me anymore, as the supposed upward trend section should have completed its formation several weeks ago. But every time, there are some reasons for the demand for the US currency to fall slightly.
Yesterday, for example, the important ISM business activity index for the services sector was released in the US, which amounted to 51.9 points, with a March value of 51.2 and a forecast of 51.5. Strong report? Strong. Important? Important. But demand for the US currency did not increase. An hour earlier, the ADP report on the number of new jobs in the US was released, which was twice the market expectations – plus 296 thousand. It could also have increased demand for the dollar, which would have fully aligned with the current wave markup.
In the evening, the FOMC raised the interest rate by 25 basis points, which was not a “surprise” for anyone. And again, the dollar had an excellent opportunity to rise but did not take advantage of it. It began to grow today when the ECB raised rates by 25 basis points each, implementing the “baseline” scenario. It turns out that the dollar fell on the Fed’s “hawkish” decision, and the euro fell on the ECB’s “hawkish” decision. I base my analysis more on the wave markup than the news background, so I expect the pair to decline.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion or has already been completed. Therefore, it is now possible to advise sales, and the pair has quite a large space for a decline. Targets in the area of 1.0500–1.0600 can be considered quite realistic. With these targets, I advise selling the pair on MACD indicator reversals “down” as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.
On the senior wave scale, the wave markup of the ascending trend section has taken on an extended form but is likely completed. We saw five waves, which are most likely an a-b-c-d-e structure. The formation of the downward 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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