02.07.202417:08 Forex Analysis & Reviews: Analysis of EUR/USD pair on July 2, 2024

The wave structure on the 4-hour chart for EUR/USD remains unchanged. Currently, we are observing the formation of the supposed wave 3 within wave 3 or c of the downward trend segment. If this is the case, the decline in quotes will continue for quite some time, as the first wave of this segment finished forming around the 1.0450 mark. Therefore, the third wave of this trend segment should conclude below that level, even if it does not take an impulsive form.

The 1.0450 mark is the target only for the third wave. If the current downward trend segment takes an impulsive form, we will have five waves, and the euro could drop below the 1.0000 mark. Certainly, it isn't easy to anticipate such a development right now, but in recent years, there have been plenty of surprises in the currency market.

An alternative scenario I currently see is the transformation of wave 3 or c into a corrective form with five waves of the a-b-c-d-e type. Even in this case, the low of wave 3 or c should be below the low of wave 1 or a. Therefore, if the formation of wave e in 3 or c has begun, rather than 3 in 3 or c, the decline of the instrument should still continue.

Inflation in the Eurozone is slowly returning to its minimum.

The EUR/USD exchange rate decreased by 10 basis points on Tuesday, and we continue to witness daily movements that are not very pleasant to watch. On Monday, the total amplitude of movements was at least 30 points, today – 15. Certainly, the American session has just begun, so the market may still "heat up," but over the past few weeks, I have not seen any good movements. This situation was understandable last week or the week before when there was almost no news background. Christine Lagarde and Jerome Powell have spoken this week and will speak again today. Reports on inflation in Germany and the Eurozone have been released, an important ISM index was published, and the JOLTS report is forthcoming. No one can say there is a lack of economic statistics, so the market is taking a break.

Inflation in Germany has slowed, and inflation in the Eurozone has slowed. Both inflation rates decreased only slightly in June, but it should be remembered that the ECB has started easing monetary policy, so the pressure on consumer prices will now be weaker than before. Nevertheless, inflation is decreasing, bringing the ECB closer to a second round of easing. However, the market sees this as fine for the European currency. The decline of the instrument has halted once again. We must wait a few more weeks for the market to push the euro down by at least another 100 points. The latest wave 3 or C has been forming for six months; during this time, the European currency has lost 400 points.

General conclusions.

Based on the conducted analysis of EUR/USD, I conclude that the construction of the downward wave set continues. In the near future, I expect the formation of the descending wave 3 or C to continue with a significant decline in the instrument. I continue to consider only sales with targets around the estimated mark of 1.0462. The internal wave structure of wave 3 or C may take on a five-wave corrective form, but even in this case, the quotes should drop to the area of 4-5 figures.

On a higher wave scale, it is evident that the supposed wave 2 or B, which in length amounted to more than 76.4% of the Fibonacci retracement of the first wave, may be complete. If this is indeed the case, the scenario of forming wave 3 or C and a decline of the instrument below the 4th figure continues to unfold.

The main principles of my analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often involve changes.
2. If you are not confident about the market's conditions, it is better not to enter it.
3. There is never and can never be 100% certainty in the direction of movement. Remember about protective Stop-Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.