EUR/USD. Analysis for November 7th. Inflation and the labor market should be crucial for the Fed
November 7, 2023 4:24 pm
The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have only seen three wave structures that constantly alternate with each other. For the last few months, I have regularly mentioned that I expect the pair to be near the 5th figure, from which the construction of the last upward three-wave structure began. This target was reached after a two-month decline. After achieving this target, the construction of corrective wave 2 or b began, which has already taken on a clear five-wave and fully completed shape. This means that a euro-currency decline may resume this week.
Regardless of the final form of wave 2 or b (which could be even more complex), the general decline of the European currency will not be completed since it still requires the construction of the third wave of the downward trend. Inside the first wave, there are five internal waves, so it is considered completed. Inside the second wave, there are also five waves, which means it may also be completed. I expect the formation of wave 3 or c.
An empty Tuesday and a retreat by buyers.
The euro/dollar pair’s exchange rate decreased by 50 basis points on Tuesday. Throughout the day, quotes continued to fall from the highs reached on Monday. Despite the fact that the news background has been virtually absent for the second consecutive day, the market confidently reduces demand for the Euro currency and boosts the US dollar. And it is this scenario that I expected to see, as I have mentioned in my previous reviews. Wave 2 or b has taken on a five-wave form, which means it is likely completed. Therefore, the construction of wave 3 or c should begin now. It’s quite straightforward.
Meanwhile, unexpected support for the US dollar came from where no one expected it. I would like to remind you that the FOMC’s mood has noticeably weakened lately, and the interest rate was not raised at the last meeting (despite rising inflation). Jerome Powell did not give any signals about possible tightening in December. However, Minneapolis Fed President Neel Kashkari said today that he does not intend to put a dot on the issue of tightening the monetary policy committee. He believes that the economy should indicate the path the regulator should take. If inflation, according to him, starts to rise (and it already has), it means the FOMC’s work is not finished. Strong economic activity makes one doubt whether the regulator has done all that is necessary, Kashkari believes. The labor market remains strong, and the question of a rate cut is not being discussed at this time. The demand for the US dollar may rise today against the backdrop of hawkish statements by Kashkari.
General Conclusions.
Based on the analysis conducted, I conclude that the construction of a bearish set of waves continues. Targets around the 1.0463 mark have been ideally achieved, and an unsuccessful attempt to break this mark indicated the transition to the construction of a correctional wave. Wave 2 or b has taken on a completed form, so I expect an impulsive downward wave 3 or c in the near future. I still recommend selling, although at first cautiously, as wave 2 or b could theoretically take on an even more prolonged form.
On a larger time scale, the wave analysis of the upward segment of the trend has taken on an extended form, but it is likely completed. We have seen five upward waves that most likely form the structure a-b-c-d-e. After that, the pair formed four three-wave structures: two downward and two upward. Now, it has entered the stage of constructing another more prolonged descending three-wave structure.
The material has been provided by InstaForex Company – www.instaforex.com
The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have only seen three wave structures that constantly alternate with each other. For the last few months, I have regularly mentioned that I expect the pair to be near the 5th figure, from which the construction of the last upward three-wave structure began. This target was reached after a two-month decline. After achieving this target, the construction of corrective wave 2 or b began, which has already taken on a clear five-wave and fully completed shape. This means that a euro-currency decline may resume this week.
Regardless of the final form of wave 2 or b (which could be even more complex), the general decline of the European currency will not be completed since it still requires the construction of the third wave of the downward trend. Inside the first wave, there are five internal waves, so it is considered completed. Inside the second wave, there are also five waves, which means it may also be completed. I expect the formation of wave 3 or c.
An empty Tuesday and a retreat by buyers.
The euro/dollar pair’s exchange rate decreased by 50 basis points on Tuesday. Throughout the day, quotes continued to fall from the highs reached on Monday. Despite the fact that the news background has been virtually absent for the second consecutive day, the market confidently reduces demand for the Euro currency and boosts the US dollar. And it is this scenario that I expected to see, as I have mentioned in my previous reviews. Wave 2 or b has taken on a five-wave form, which means it is likely completed. Therefore, the construction of wave 3 or c should begin now. It’s quite straightforward.
Meanwhile, unexpected support for the US dollar came from where no one expected it. I would like to remind you that the FOMC’s mood has noticeably weakened lately, and the interest rate was not raised at the last meeting (despite rising inflation). Jerome Powell did not give any signals about possible tightening in December. However, Minneapolis Fed President Neel Kashkari said today that he does not intend to put a dot on the issue of tightening the monetary policy committee. He believes that the economy should indicate the path the regulator should take. If inflation, according to him, starts to rise (and it already has), it means the FOMC’s work is not finished. Strong economic activity makes one doubt whether the regulator has done all that is necessary, Kashkari believes. The labor market remains strong, and the question of a rate cut is not being discussed at this time. The demand for the US dollar may rise today against the backdrop of hawkish statements by Kashkari.
General Conclusions.
Based on the analysis conducted, I conclude that the construction of a bearish set of waves continues. Targets around the 1.0463 mark have been ideally achieved, and an unsuccessful attempt to break this mark indicated the transition to the construction of a correctional wave. Wave 2 or b has taken on a completed form, so I expect an impulsive downward wave 3 or c in the near future. I still recommend selling, although at first cautiously, as wave 2 or b could theoretically take on an even more prolonged form.
On a larger time scale, the wave analysis of the upward segment of the trend has taken on an extended form, but it is likely completed. We have seen five upward waves that most likely form the structure a-b-c-d-e. After that, the pair formed four three-wave structures: two downward and two upward. Now, it has entered the stage of constructing another more prolonged descending three-wave structure.
The material has been provided by InstaForex Company – www.instaforex.com
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