27.08.202417:41 Forex Analysis & Reviews: Analysis of EUR/USD on August 27, 2024

The wave structure for the EUR/USD pair on the 4-hour chart is becoming increasingly complex. If we analyze the entire trend segment that began in September 2022, when the euro dropped to the 0.9530 level, it appears that we are within an uptrend. However, even within this segment, it is difficult to distinguish the higher-order waves. In other words, there is no clear impulse trend. We see a constant alternation of three- and five-wave corrective structures. It could be assumed that an impulsive upward trend segment began on April 16, but it's unclear how to account for all the waves before that. I emphasize that, in my view, it's important to highlight the simplest and most understandable wave structures.

Since January 2024, I can only identify two a-b-c three-wave patterns, with a turning point on April 16. Therefore, the first thing to understand is that there is currently no clear trend. After the current wave "c" is completed, a new downward three-wave structure may begin. The trend segment from April 16 may take on a five-wave form, but it would also be corrective. In such circumstances, I cannot believe in a prolonged rise in the euro, although it could still last for several more months.

Dollar Sales Continue.

The EUR/USD pair decreased by 5 points on Tuesday. I can't even call this movement a "decrease" because 5 points is negligible. Over the past three weeks, the dollar has fallen by about 400 points, and in the last two days of "correction," it has risen by 35. It's worth noting that yesterday's report on U.S. durable goods orders provided the market with a real opportunity to correct the pair downward. The report was ignored, and the dollar did not strengthen. The market remains under the influence of Jerome Powell's "dovish" comments on Friday, which, in fact, were nothing new.

Many analysts this week cautiously note that Powell's rhetoric on Friday was indeed "dovish," but he didn't really say anything new. These cautious statements are made to explain why the U.S. dollar continues to fall. Therefore, many analysts take the position that "Powell, of course, didn't say anything new, but his speech was still dovish," which somehow justifies the new decline in the dollar. However, I would like to point out that before the September 18 meeting, another batch of U.S. labor market and unemployment data will be released, as well as an inflation report. If it turns out that the labor market has improved and inflation has risen, the Fed might deliver a "hawkish" surprise. Where the dollar will go in that case is hard to imagine, especially since the market is 100% convinced that the easing of policy will begin at the next meeting.

General Conclusions.

Based on the analysis of EUR/USD, I conclude that the pair continues to build a series of corrective structures. From the current positions, the upward movement may continue within a five-wave corrective structure, and the scenario of forming a downward wave "d" is temporarily canceled. Consequently, the rise in quotes may continue with targets around the 1.1302 level, which corresponds to 200.0% Fibonacci. The market continues to price in rate cuts by the Fed in September, November, December, and 2025. The unsuccessful attempt to break through the 1.1182 level, which corresponds to 161.8% Fibonacci, indicates a possible pullback from the peaks reached.

On a larger wave scale, it is also clear that the wave structure is becoming more complex. It is likely that an upward series of waves awaits us, but its length and structure are difficult to predict at this time.

Basic Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often undergo changes.
2. If you're not confident about what's happening in the market, it's better not to enter.
3. There is never 100% certainty in the direction of movement. Don't forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.