EUR/USD. Analysis for April 25. Philip Lane supports a rate hike in May
April 25, 2023 2:23 pm
The wave markup of the 4-hour chart for the euro/dollar pair continues to get tangled due to the latest upward waves, but it has not changed in recent days and weeks. These waves are an independent upward trend section (since the last downward one can be considered a three-wave and completed), and it may also be completed if it takes a three-wave form. Thus, the wave pattern for the euro currency may be very complicated, and it is already very difficult to work with it. At the current positions, the formation of an upward wave set may end as the peak of the third wave goes beyond the peak of the first. We saw the same thing in the last downward formation (a minimal update of the low and the 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 proceed from the scenario with a decrease in the pair because the upward three-wave structure looks complete and finished. Therefore, a new downward three-wave structure may begin to be built at this time, and an unsuccessful attempt to break through the 1.1030 mark indicates the market’s readiness for sales.
Demand for the euro currency is already falling, although the news background has not changed.
The euro/dollar pair rose by 60 basis points on Monday and fell by 40 today. Recall that the key event of yesterday can be considered the speech of Pierre Wunsch, the President of the Central Bank of Belgium, who said that deposit and lending rates might rise more than everyone is waiting for. He openly stated that the goals for inflation and wages had not been reached, so the regulator will continue to tighten monetary policy until these two indicators start to slow down. The rhetoric is unequivocally “hawkish.” Today, ECB Chief Economist Philip Lane said that the rate should be raised again at the end of the May meeting, which will take place next week. The market did not doubt that the ECB would make such a decision; the question is how much the rate will rise. The probability of an increase of 25 basis points is about 65%, and 50 basis points – 35%. The statements made by Lane can also be considered “hawkish,” or at least neutral, but certainly not “dovish.” However, demand for the European currency is already declining today.
Based on this, the market is unwilling to continue increasing purchases, which increases the chances of building a new downward three-wave structure. Yesterday’s rise seems random, as the news background yesterday and today were almost identical. There were two speeches by ECB members, each stating the need to continue raising rates. But yesterday the euro rose, today it fell. The scenario of building a new downward trend section is the most logical and fair at this time.
General conclusions.
Based on the analysis conducted, the upward trend section is formed. Therefore, now sales can be advised, as the pair has ample room for decline. The target of 1.0600 can be considered quite realistic. With this target, I advise selling the pair on MACD reversals “down” until the moment the quotes successfully attempt to break through the 1.1030 mark, which may not even happen.
On the older wave scale, the wave markup of the ascending trend section has taken on an elongated form but is likely completed. We saw five waves up, which most likely represent 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 tangled due to the latest upward waves, but it has not changed in recent days and weeks. These waves are an independent upward trend section (since the last downward one can be considered a three-wave and completed), and it may also be completed if it takes a three-wave form. Thus, the wave pattern for the euro currency may be very complicated, and it is already very difficult to work with it. At the current positions, the formation of an upward wave set may end as the peak of the third wave goes beyond the peak of the first. We saw the same thing in the last downward formation (a minimal update of the low and the 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 proceed from the scenario with a decrease in the pair because the upward three-wave structure looks complete and finished. Therefore, a new downward three-wave structure may begin to be built at this time, and an unsuccessful attempt to break through the 1.1030 mark indicates the market’s readiness for sales.
Demand for the euro currency is already falling, although the news background has not changed.
The euro/dollar pair rose by 60 basis points on Monday and fell by 40 today. Recall that the key event of yesterday can be considered the speech of Pierre Wunsch, the President of the Central Bank of Belgium, who said that deposit and lending rates might rise more than everyone is waiting for. He openly stated that the goals for inflation and wages had not been reached, so the regulator will continue to tighten monetary policy until these two indicators start to slow down. The rhetoric is unequivocally “hawkish.” Today, ECB Chief Economist Philip Lane said that the rate should be raised again at the end of the May meeting, which will take place next week. The market did not doubt that the ECB would make such a decision; the question is how much the rate will rise. The probability of an increase of 25 basis points is about 65%, and 50 basis points – 35%. The statements made by Lane can also be considered “hawkish,” or at least neutral, but certainly not “dovish.” However, demand for the European currency is already declining today.
Based on this, the market is unwilling to continue increasing purchases, which increases the chances of building a new downward three-wave structure. Yesterday’s rise seems random, as the news background yesterday and today were almost identical. There were two speeches by ECB members, each stating the need to continue raising rates. But yesterday the euro rose, today it fell. The scenario of building a new downward trend section is the most logical and fair at this time.
General conclusions.
Based on the analysis conducted, the upward trend section is formed. Therefore, now sales can be advised, as the pair has ample room for decline. The target of 1.0600 can be considered quite realistic. With this target, I advise selling the pair on MACD reversals “down” until the moment the quotes successfully attempt to break through the 1.1030 mark, which may not even happen.
On the older wave scale, the wave markup of the ascending trend section has taken on an elongated form but is likely completed. We saw five waves up, which most likely represent 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
Related Posts: