EUR/USD. Analysis for September 18th. The ECB has likely completed the tightening process with an 80% probability
September 18, 2023 5:24 pm
The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have seen only three wave structures that constantly alternate with each other. Over the past few months, I have regularly mentioned that I expect the pair to approach the 5th figure, where the construction of the last upward three-wave structure began. The pair has yet to reach the 5th figure, but it has come very close to the 6th. Another upward three-wave structure is completed, so the market continues to build a downward trend.
The recent increase in quotes does not resemble a full-fledged wave 2 or b. We saw a similar wave from August 3 to August 10. Most likely, this is an internal corrective wave 1 or a. If this is the case, the decline in quotes may continue for some time within the framework of the first wave of the descending trend. The depreciation of the European currency will not be completed because the construction of the third wave is required. There are already five internal waves within the first wave, so its completion is approaching. An unsuccessful attempt to break through the 1.0637 mark, equivalent to 100.0% according to Fibonacci, may indicate readiness for constructing a corrective wave.
The market has been waiting for this and has finally got it.
The euro/dollar pair rate increased by another 20 basis points on Monday. These 20 points, combined with yesterday’s 20 points, do not play any role for the euro, which, within the not-yet-completed first wave, has declined by 620 points. Currently, there is every reason to assume the construction of wave 2 or b, and now is a good time for correction. The market often anticipates certain news events in advance. Over the past two months, we have seen a decrease in demand for the euro amid expectations of the end of the monetary policy tightening process. Last week, several representatives of the ECB admitted that the rate hike is likely over, with an 80% probability. As this factor has already been partially played out, it may be time to construct an upward wave.
This week, the FOMC meeting could also lead to decreased demand for the dollar. If the FOMC does not decide to tighten policy after two consecutive months of rising inflation, it could disappoint the markets. This disappointment could result in a 200-300 point move upward, which would represent wave 2 or b. After its completion, we can expect a new strong decline in the European currency since the news background has not supported it in recent months. Today, on Monday, Luis de Guindos stated that the worst is behind us regarding inflation, hinting once again that aggressive regulator actions are no longer needed.
General Conclusions:
Based on the analysis conducted, the construction of the upward wave set is complete. The targets for the descending trend segment around 1.0500-1.0600 are achievable. Therefore, I recommend selling the pair with targets near the levels of 1.0636 and 1.0483. An unsuccessful attempt to break through the 1.0636 level indicates the possible completion of the first wave, which has taken on a fairly extended form.
On the larger wave scale, the upward wave labeling has taken on an extended form but is likely to be completed. We have seen five upward waves, most likely the structure of a-b-c-d-e. The pair then formed four three-wave structures: two downward and two upward. It has likely moved on to the stage of building another 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 seen only three wave structures that constantly alternate with each other. Over the past few months, I have regularly mentioned that I expect the pair to approach the 5th figure, where the construction of the last upward three-wave structure began. The pair has yet to reach the 5th figure, but it has come very close to the 6th. Another upward three-wave structure is completed, so the market continues to build a downward trend.
The recent increase in quotes does not resemble a full-fledged wave 2 or b. We saw a similar wave from August 3 to August 10. Most likely, this is an internal corrective wave 1 or a. If this is the case, the decline in quotes may continue for some time within the framework of the first wave of the descending trend. The depreciation of the European currency will not be completed because the construction of the third wave is required. There are already five internal waves within the first wave, so its completion is approaching. An unsuccessful attempt to break through the 1.0637 mark, equivalent to 100.0% according to Fibonacci, may indicate readiness for constructing a corrective wave.
The market has been waiting for this and has finally got it.
The euro/dollar pair rate increased by another 20 basis points on Monday. These 20 points, combined with yesterday’s 20 points, do not play any role for the euro, which, within the not-yet-completed first wave, has declined by 620 points. Currently, there is every reason to assume the construction of wave 2 or b, and now is a good time for correction. The market often anticipates certain news events in advance. Over the past two months, we have seen a decrease in demand for the euro amid expectations of the end of the monetary policy tightening process. Last week, several representatives of the ECB admitted that the rate hike is likely over, with an 80% probability. As this factor has already been partially played out, it may be time to construct an upward wave.
This week, the FOMC meeting could also lead to decreased demand for the dollar. If the FOMC does not decide to tighten policy after two consecutive months of rising inflation, it could disappoint the markets. This disappointment could result in a 200-300 point move upward, which would represent wave 2 or b. After its completion, we can expect a new strong decline in the European currency since the news background has not supported it in recent months. Today, on Monday, Luis de Guindos stated that the worst is behind us regarding inflation, hinting once again that aggressive regulator actions are no longer needed.
General Conclusions:
Based on the analysis conducted, the construction of the upward wave set is complete. The targets for the descending trend segment around 1.0500-1.0600 are achievable. Therefore, I recommend selling the pair with targets near the levels of 1.0636 and 1.0483. An unsuccessful attempt to break through the 1.0636 level indicates the possible completion of the first wave, which has taken on a fairly extended form.
On the larger wave scale, the upward wave labeling has taken on an extended form but is likely to be completed. We have seen five upward waves, most likely the structure of a-b-c-d-e. The pair then formed four three-wave structures: two downward and two upward. It has likely moved on to the stage of building another descending three-wave structure.
The material has been provided by InstaForex Company – www.instaforex.com
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