06.01.202516:48 Forex Analysis & Reviews: Analysis for EUR/USD on January 6, 2025

The wave pattern on the 4-hour chart for EUR/USD is becoming increasingly clear. A new downward structure began forming on September 25, which has now developed into an impulsive pattern. The fifth wave, as I anticipated, has taken on a convincing form and could be considered complete at any moment (or might already be completed). This, of course, doesn't mean it must end right now, but any day could mark the end of the current wave structure.

The current wave pattern is straightforward and unambiguous. It's important to note that the news background can influence the market for months but not indefinitely. Reports from the U.S. in recent months indicate that the economy is not facing significant problems. There is no recession, nor is one expected. The economy might slow down, but its current growth rates allow it to navigate this period without significant losses. The Federal Reserve (Fed) is likely to implement monetary easing more slowly and cautiously than markets anticipated at the start of the year. On the other hand, the European Central Bank (ECB) sees no reason to halt its easing efforts and will likely continue. Based on the wave structure, the euro could see growth in the coming weeks, but a new impulsive downward wave is expected afterward.

The EUR/USD pair rose by over 100 basis points on Monday. The news did not suggest such a sharp rise in euro quotes, but the convincing appearance of Wave 5 in the first trend section allows me to assume it has completed. If this is indeed the case, the first wave of the new downtrend section has also concluded. Thus, the construction of a three- or five-wave corrective structure is now expected. This structure doesn't mean that all challenges for the euro are behind. Instead, it signifies a market pause for consolidation, correction, and position distribution. In simple terms, several weeks of pause before resuming euro sales.

Today, the Eurozone released December services PMI indexes. Germany's index was 51.2, slightly above the 51.0 forecast. The Eurozone index was 51.6, compared to a 51.4 forecast. However, I do not believe that a 120-point rise in euro demand over a few hours was driven by these indices. More likely, the first wave of the downtrend ended, leading to a sharp retreat from the recent lows. Additionally, Germany's inflation report showed CPI growth to 2.6%, which might have supported the euro's sharp appreciation.

Summary

Based on the EUR/USD analysis, the pair continues constructing a downtrend section. This section currently appears well-formed and complete. At this point, I believe the first wave of this trend segment has concluded. Therefore, a three-wave or more complex corrective structure is anticipated, within which new selling opportunities can be identified, targeting levels much lower than the 1.0200 level.

On a higher wave scale, the pattern is evolving into a more complex structure, primarily consisting of corrective waves. A new downward wave sequence is likely, though its length and structure remain uncertain.

Key Principles of My Analysis:

1. Wave structures must be simple and clear. Complex structures are challenging to trade and often prone to changes.
2. If there is uncertainty about market developments, it's better to stay out.
3. There can never be 100% certainty in movement direction. Always use Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.