EUR/USD. Analysis for May 11. Joachim Nagel: EU inflation will fall very slowly
May 11, 2023 3:22 pm
The wave analysis of the 4-hour chart for the euro/dollar pair continues to get confusing due to the latest ascending waves, but it has generally remained the same in recent days and weeks. These waves are an independent upward trend section (since the last downward can be considered three-wave and completed), and it may also be nearing completion (or has already been completed) if it takes a three-wave form. Thus, the wave picture for the euro currency can become very complex, and it is challenging to work with it now. The pair has been moving horizontally for several weeks in a row. At the current positions, the formation of an ascending set of waves may be complete as the third wave’s peak goes beyond the first’s peak. We saw the same thing in the last descending formation (a minimal update of the low and the 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 advisable to proceed from a scenario with a decrease in the pair because the ascending three-wave looks fully staffed and completed. Therefore, in the near future, the formation of a descending three-wave can begin. However, 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 drop in inflation to 2%.
The euro/dollar pair fell by 40 basis points on Thursday, again demonstrating weak activity. The quotes fell synchronously with the pound/dollar pair in the morning, even before the Bank of England meeting. There was no informational background at this time. Thus, we now observe a leisurely rollback from the previously reached highs. This rollback could begin a new downward trend segment, and attempting to break through the 0.0% level can ultimately be unsuccessful. An excellent background has now been formed to form a descending three-wave.
Today, the President of the Bundesbank and ECB member Joachim Nagel spoke. He informed the market that the European regulator has decided to apply a “meeting-to-meeting” approach to changing interest rates. He noted that no options are excluded for the September meeting, meaning that the ECB’s policy can continue to tighten all summer and even in the early autumn. Remember, the market is now pricing two more rate hikes, but the ECB may opt for a more rigorous approach. According to the core indicator, Nagel stated that inflation would approach 2% no earlier than a year and a half. As the head of the Bundesbank slightly tightened the ECB’s general rhetoric, the euro currency could expect a new rise. But during the day, as I said, the pair is falling, and market activity is low.
All of this gives me a reason to assume that the market still needs to complete the formation of an ascending set of waves. I expect a drop to the low of the past downward trend section.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion. Therefore, sales can now be advised, and the pair has much room for a decrease. Targets in the 1.0500–1.0600 range can be considered quite realistic. With these targets, I advise selling the pair on the MACD indicator’s reversals “downwards” as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.
On a larger wave scale, the wave analysis of the ascending trend section has taken on an extended form but is probably complete. We saw five waves up, 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 duration.
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 get confusing due to the latest ascending waves, but it has generally remained the same in recent days and weeks. These waves are an independent upward trend section (since the last downward can be considered three-wave and completed), and it may also be nearing completion (or has already been completed) if it takes a three-wave form. Thus, the wave picture for the euro currency can become very complex, and it is challenging to work with it now. The pair has been moving horizontally for several weeks in a row. At the current positions, the formation of an ascending set of waves may be complete as the third wave’s peak goes beyond the first’s peak. We saw the same thing in the last descending formation (a minimal update of the low and the 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 advisable to proceed from a scenario with a decrease in the pair because the ascending three-wave looks fully staffed and completed. Therefore, in the near future, the formation of a descending three-wave can begin. However, 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 drop in inflation to 2%.
The euro/dollar pair fell by 40 basis points on Thursday, again demonstrating weak activity. The quotes fell synchronously with the pound/dollar pair in the morning, even before the Bank of England meeting. There was no informational background at this time. Thus, we now observe a leisurely rollback from the previously reached highs. This rollback could begin a new downward trend segment, and attempting to break through the 0.0% level can ultimately be unsuccessful. An excellent background has now been formed to form a descending three-wave.
Today, the President of the Bundesbank and ECB member Joachim Nagel spoke. He informed the market that the European regulator has decided to apply a “meeting-to-meeting” approach to changing interest rates. He noted that no options are excluded for the September meeting, meaning that the ECB’s policy can continue to tighten all summer and even in the early autumn. Remember, the market is now pricing two more rate hikes, but the ECB may opt for a more rigorous approach. According to the core indicator, Nagel stated that inflation would approach 2% no earlier than a year and a half. As the head of the Bundesbank slightly tightened the ECB’s general rhetoric, the euro currency could expect a new rise. But during the day, as I said, the pair is falling, and market activity is low.
All of this gives me a reason to assume that the market still needs to complete the formation of an ascending set of waves. I expect a drop to the low of the past downward trend section.
General conclusions.
Based on the analysis, the formation of the upward trend section is nearing completion. Therefore, sales can now be advised, and the pair has much room for a decrease. Targets in the 1.0500–1.0600 range can be considered quite realistic. With these targets, I advise selling the pair on the MACD indicator’s reversals “downwards” as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.
On a larger wave scale, the wave analysis of the ascending trend section has taken on an extended form but is probably complete. We saw five waves up, 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 duration.
The material has been provided by InstaForex Company – www.instaforex.com
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