EUR/USD. Analysis for October 12th. Inflation in the US has not been encouraging for three months
October 12, 2023 2:25 pm
The wave analysis of the 4-hour chart for the euro/dollar pair remains clear. Over the past year, we’ve witnessed three wave structures constantly alternating with each other. Over the past months, I’ve been regularly stating my expectation that the pair would approach the 1.5 figure, which marked the beginning of the last upward three-wave structure. This target was reached after two months of declines. The presumed first wave of a new downward trend may still be under construction, although there are certain signs of its completion at the moment.
None of the recent upward movements appeared to be a full-fledged wave 2 or B. Thus, these were all internal corrective waves within wave 1 or A. If this is indeed the case, the decline in quotes may continue for some time as part of this wave. The overall decline in the European currency won’t be over, as the formation of a third wave is required. Within the first wave, five internal waves are already visible, so it may have been completed. An unsuccessful attempt to break through the 1.0463 level, equivalent to 127.2% on the Fibonacci scale, indicates the market’s readiness to start forming a corrective wave.
Demand for the US dollar has increased since the release of the inflation report.
On Thursday, the euro/dollar pair’s exchange rate decreased by 35 basis points. This may seem minor even for the European currency, but the key point is different. An unsuccessful attempt to break through the 1.0636 level, which corresponds to 100.0% on the Fibonacci scale, is the real issue. If the market does not regain its composure today or tomorrow, the formation of an upward wave will end. It will once again be regarded as an internal wave within wave 1 or A, casting doubt on the further appreciation of the euro. Nevertheless, I still believe that we are dealing with wave 2 or B, and the unsuccessful attempt to break through 1.0636 will not be the last in the coming days. Therefore, I anticipate consolidation above 1.0636 and a continuation of the pair’s growth.
Now, let’s talk about US inflation. Remember that by the end of July and August, the Consumer Price Index (CPI) accelerated to 3.7% year-on-year, while core inflation slowed down to 4.3% year-on-year. The September report was supposed to answer whether the acceleration of inflation was a coincidence and if the Federal Reserve (Fed) should now be expected to take decisive measures in November or December. Just this week, Bostic, Jefferson, and Logan stated that a new interest rate hike may not be necessary. Today, it became known that inflation remained at 3.7%, with core inflation dropping to 4.1%. In my view, these figures increase the likelihood of tightening in the remaining three months. However, the US dollar’s strengthening may be short-lived, as wave 2 or B is not yet complete.
General conclusions:
Based on the analysis conducted, I conclude that the construction of a bearish set of waves is ongoing. The targets around the 1.0463 level have been perfectly achieved, and the failed attempt to break through this level suggests the market’s readiness to form a correctional wave. In my recent reviews, I’ve warned that considering closing short positions may be appropriate, given the high likelihood of the formation of an upward wave. An unsuccessful attempt to break through 1.0637, which corresponds to 100.0% on the Fibonacci scale, will indicate the market’s readiness to resume the decline. In this case, I advise new sales of the pair with a target of 1.0463.
On the larger wave scale, the wave analysis of the ascending segment of the trend has taken on an extended form, but it’s likely completed. We’ve seen five upward waves, most likely forming a structure of a-b-c-d-e. Next, the pair built four three-wave structures: two downward and two upward. It has likely now entered a phase of constructing another extensive three-wave downward 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 clear. Over the past year, we’ve witnessed three wave structures constantly alternating with each other. Over the past months, I’ve been regularly stating my expectation that the pair would approach the 1.5 figure, which marked the beginning of the last upward three-wave structure. This target was reached after two months of declines. The presumed first wave of a new downward trend may still be under construction, although there are certain signs of its completion at the moment.
None of the recent upward movements appeared to be a full-fledged wave 2 or B. Thus, these were all internal corrective waves within wave 1 or A. If this is indeed the case, the decline in quotes may continue for some time as part of this wave. The overall decline in the European currency won’t be over, as the formation of a third wave is required. Within the first wave, five internal waves are already visible, so it may have been completed. An unsuccessful attempt to break through the 1.0463 level, equivalent to 127.2% on the Fibonacci scale, indicates the market’s readiness to start forming a corrective wave.
Demand for the US dollar has increased since the release of the inflation report.
On Thursday, the euro/dollar pair’s exchange rate decreased by 35 basis points. This may seem minor even for the European currency, but the key point is different. An unsuccessful attempt to break through the 1.0636 level, which corresponds to 100.0% on the Fibonacci scale, is the real issue. If the market does not regain its composure today or tomorrow, the formation of an upward wave will end. It will once again be regarded as an internal wave within wave 1 or A, casting doubt on the further appreciation of the euro. Nevertheless, I still believe that we are dealing with wave 2 or B, and the unsuccessful attempt to break through 1.0636 will not be the last in the coming days. Therefore, I anticipate consolidation above 1.0636 and a continuation of the pair’s growth.
Now, let’s talk about US inflation. Remember that by the end of July and August, the Consumer Price Index (CPI) accelerated to 3.7% year-on-year, while core inflation slowed down to 4.3% year-on-year. The September report was supposed to answer whether the acceleration of inflation was a coincidence and if the Federal Reserve (Fed) should now be expected to take decisive measures in November or December. Just this week, Bostic, Jefferson, and Logan stated that a new interest rate hike may not be necessary. Today, it became known that inflation remained at 3.7%, with core inflation dropping to 4.1%. In my view, these figures increase the likelihood of tightening in the remaining three months. However, the US dollar’s strengthening may be short-lived, as wave 2 or B is not yet complete.
General conclusions:
Based on the analysis conducted, I conclude that the construction of a bearish set of waves is ongoing. The targets around the 1.0463 level have been perfectly achieved, and the failed attempt to break through this level suggests the market’s readiness to form a correctional wave. In my recent reviews, I’ve warned that considering closing short positions may be appropriate, given the high likelihood of the formation of an upward wave. An unsuccessful attempt to break through 1.0637, which corresponds to 100.0% on the Fibonacci scale, will indicate the market’s readiness to resume the decline. In this case, I advise new sales of the pair with a target of 1.0463.
On the larger wave scale, the wave analysis of the ascending segment of the trend has taken on an extended form, but it’s likely completed. We’ve seen five upward waves, most likely forming a structure of a-b-c-d-e. Next, the pair built four three-wave structures: two downward and two upward. It has likely now entered a phase of constructing another extensive three-wave downward structure.
The material has been provided by InstaForex Company – www.instaforex.com
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