EUR/USD. Analysis for May 2. Inflation in the EU stops declining again
May 2, 2023 2:23 pm
The wave markup of the 4-hour chart for the euro/dollar pair continues to get more complicated due to the recent ascending waves, but it has stayed the same in recent days and weeks. These waves could be an independent upward section of the trend (as the last downward one can be considered three-wave and completed), and it could also be nearing completion if it takes a three-wave form. Thus, the wave picture for the euro currency can become very complex, and working with it isn’t easy. At the current positions, the formation of the upward set of waves may be completed as the peak of the third wave goes beyond the peak of the first. We saw the same thing in the last downward formation (minimal low update and completion of the section). However, there are other options for wave markup. For example, a full-fledged five-wave (but also corrective) structure. It is now appropriate to rely on the scenario with a decrease in the pair because the ascending three-wave looks complete and finished. Therefore, soon, the formation of a new downward three-wave may begin. However, a new successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
Inflation rose slightly in April in the EU.
The euro/dollar pair fell by only 15 basis points on Tuesday, but the day is not over yet, and at least one important report is ahead. A very weak retail trade report was released in Germany in the first half of the day. Volumes in March decreased by 2.4% m/m, although the market expected growth of 0.4-0.5%. However, there is a flip side to the coin. The decreased retail sales volume means that German citizens have started spending less. And this means that inflation may continue to slow down, as high demand and increasing spending cause price growth. Demand for the euro currency decreased after this report, but insignificantly.
The more important report was on inflation in the European Union for April. The market immediately expected an increase of 0.1%, and the forecast was fully justified. Retail sales figures and inflation do not correlate, as they are for different months. In April, retail sales may jump slightly, providing a small inflation increase. In general, the current inflation rate still needs to allow the central bank to think about ending the process of tightening monetary policy. There is no doubt that on Thursday, at the meeting, another interest rate hike of 25 basis points will be announced. Some analysts even admit an increase of 50 points. However, the market has also managed to play out this rate hike in recent weeks, as no one inside the ECB kept it a secret. Thus, the decline in the pair, which will fully correspond to the current wave markup, may continue this week.
General conclusions.
Based on the analysis conducted, the formation of the upward trend section is nearing completion or is completed. Therefore, it is advisable to sell now, and the pair has quite a large space for a decline. The targets in the 1.0500-1.0600 can be considered quite realistic. With these targets, I advise selling the pair on MACD indicator reversals “down” until the pair is below the 1.1030 mark, corresponding to 0.0% by Fibonacci.
On a larger wave scale, the wave markup of the ascending trend section has taken on an extended form but is probably completed. We saw five waves up, 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 duration.
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 ascending waves, but it has stayed the same in recent days and weeks. These waves could be an independent upward section of the trend (as the last downward one can be considered three-wave and completed), and it could also be nearing completion if it takes a three-wave form. Thus, the wave picture for the euro currency can become very complex, and working with it isn’t easy. At the current positions, the formation of the upward set of waves may be completed as the peak of the third wave goes beyond the peak of the first. We saw the same thing in the last downward formation (minimal low update and completion of the section). However, there are other options for wave markup. For example, a full-fledged five-wave (but also corrective) structure. It is now appropriate to rely on the scenario with a decrease in the pair because the ascending three-wave looks complete and finished. Therefore, soon, the formation of a new downward three-wave may begin. However, a new successful attempt to break through the 1.1030 mark will indicate the market’s readiness for new purchases.
Inflation rose slightly in April in the EU.
The euro/dollar pair fell by only 15 basis points on Tuesday, but the day is not over yet, and at least one important report is ahead. A very weak retail trade report was released in Germany in the first half of the day. Volumes in March decreased by 2.4% m/m, although the market expected growth of 0.4-0.5%. However, there is a flip side to the coin. The decreased retail sales volume means that German citizens have started spending less. And this means that inflation may continue to slow down, as high demand and increasing spending cause price growth. Demand for the euro currency decreased after this report, but insignificantly.
The more important report was on inflation in the European Union for April. The market immediately expected an increase of 0.1%, and the forecast was fully justified. Retail sales figures and inflation do not correlate, as they are for different months. In April, retail sales may jump slightly, providing a small inflation increase. In general, the current inflation rate still needs to allow the central bank to think about ending the process of tightening monetary policy. There is no doubt that on Thursday, at the meeting, another interest rate hike of 25 basis points will be announced. Some analysts even admit an increase of 50 points. However, the market has also managed to play out this rate hike in recent weeks, as no one inside the ECB kept it a secret. Thus, the decline in the pair, which will fully correspond to the current wave markup, may continue this week.
General conclusions.
Based on the analysis conducted, the formation of the upward trend section is nearing completion or is completed. Therefore, it is advisable to sell now, and the pair has quite a large space for a decline. The targets in the 1.0500-1.0600 can be considered quite realistic. With these targets, I advise selling the pair on MACD indicator reversals “down” until the pair is below the 1.1030 mark, corresponding to 0.0% by Fibonacci.
On a larger wave scale, the wave markup of the ascending trend section has taken on an extended form but is probably completed. We saw five waves up, 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 duration.
The material has been provided by InstaForex Company – www.instaforex.com
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