EUR/USD. Analysis for May 10th. Christine Lagarde prepares for a prolonged battle with inflation
May 10, 2023 2:22 pm
The wave analysis of the 4-hour chart for the euro/dollar pair continues to become more complicated due to the recent upward waves, but it has stayed the same in recent days and weeks. These waves could be an independent upward trend section (since the last downward trend can be considered three-wave and completed), and they could also be nearing completion (or already completed) if they take on a three-wave form. Thus, the wave picture for the euro currency can be very complex, and it isn’t easy to work with. The pair has been moving horizontally for several weeks in a row. At the current position, the formation of an upward set of waves may end as the peak of the third wave has gone beyond the peak of the first. The same thing was seen in the last descending formation (a minimal update and completion of the section).
At the same time, there are other options for wave analysis. For example, a full-fledged five-wave (but also corrective) structure. It is now appropriate to rely on the scenario of lowering the pair because the ascending three-wave pattern looks quite complete and finished. Therefore, in the near future, the formation of a descending three-wave pattern may begin, but a new successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
The ECB does not expect a quick victory over inflation.
The euro/dollar pair fell by literally ten basis points on Wednesday. Still, this exchange rate change does not consider movements after the US inflation report, which will be released any minute now. Market activity may increase in the coming hours. In recent days, demand for the euro currency has gradually decreased, which gives reason to assume that the formation of a new downward trend section will begin. In the first two days of the week, the news background for European and American news was quite weak, although there were several significant speeches.
In particular, ECB members spoke, stating that rates could rise longer and stronger than expected at the end of last year. This is a “hawkish” factor for the euro currency, which may not save it from falling. It isn’t easy to understand the final value of the ECB’s interest rate that the market has already taken into account. The regulator makes no secret of its intention to continue tightening, and the market has actively bought the euro in recent months. Consequently, it may have already taken into account several future rate hikes.
ECB President Christine Lagarde said today that the fight against inflation will be protracted. “There are factors that can create significant upward risks for inflation. The ECB will closely monitor wage growth rates. We still have a lot to do. A recession in 2023 will be avoided. The current state of the European economy is much better than we expected last year,” Lagarde reported. The market found no new information in Lagarde’s statements, so there was no reaction.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion. Therefore, I recommend selling now, as the pair has quite a large space for a decline. Targets in the 1.0500–1.0600 range can be considered quite realistic. With these targets, I recommend 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 analysis of the ascending trend section has taken on an extended form but is probably complete. We have seen five waves, which are most likely the 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 analysis of the 4-hour chart for the euro/dollar pair continues to become more complicated due to the recent upward waves, but it has stayed the same in recent days and weeks. These waves could be an independent upward trend section (since the last downward trend can be considered three-wave and completed), and they could also be nearing completion (or already completed) if they take on a three-wave form. Thus, the wave picture for the euro currency can be very complex, and it isn’t easy to work with. The pair has been moving horizontally for several weeks in a row. At the current position, the formation of an upward set of waves may end as the peak of the third wave has gone beyond the peak of the first. The same thing was seen in the last descending formation (a minimal update and completion of the section).
At the same time, there are other options for wave analysis. For example, a full-fledged five-wave (but also corrective) structure. It is now appropriate to rely on the scenario of lowering the pair because the ascending three-wave pattern looks quite complete and finished. Therefore, in the near future, the formation of a descending three-wave pattern may begin, but a new successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
The ECB does not expect a quick victory over inflation.
The euro/dollar pair fell by literally ten basis points on Wednesday. Still, this exchange rate change does not consider movements after the US inflation report, which will be released any minute now. Market activity may increase in the coming hours. In recent days, demand for the euro currency has gradually decreased, which gives reason to assume that the formation of a new downward trend section will begin. In the first two days of the week, the news background for European and American news was quite weak, although there were several significant speeches.
In particular, ECB members spoke, stating that rates could rise longer and stronger than expected at the end of last year. This is a “hawkish” factor for the euro currency, which may not save it from falling. It isn’t easy to understand the final value of the ECB’s interest rate that the market has already taken into account. The regulator makes no secret of its intention to continue tightening, and the market has actively bought the euro in recent months. Consequently, it may have already taken into account several future rate hikes.
ECB President Christine Lagarde said today that the fight against inflation will be protracted. “There are factors that can create significant upward risks for inflation. The ECB will closely monitor wage growth rates. We still have a lot to do. A recession in 2023 will be avoided. The current state of the European economy is much better than we expected last year,” Lagarde reported. The market found no new information in Lagarde’s statements, so there was no reaction.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion. Therefore, I recommend selling now, as the pair has quite a large space for a decline. Targets in the 1.0500–1.0600 range can be considered quite realistic. With these targets, I recommend 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 analysis of the ascending trend section has taken on an extended form but is probably complete. We have seen five waves, which are most likely the 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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