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08.07.202417:32 Analisis Forex & Kajian: Analysis of EUR/USD pair on July 8th. Why does the euro need Jerome Powell's support?

The wave pattern on the 4-hour chart for the EUR/USD instrument remains unchanged. We are currently observing the construction of the supposed wave 3 in 3 or C of the downward trend section, which is taking a very complex form. If this assumption is correct, the decline in quotes will continue for quite some time, as the first wave of this section ended around the 1.0450 mark, considering market activity. The third wave of this trend section should end lower, even if it does not take an impulsive form.

The 1.0450 mark is the target for the third wave only. If the current downward trend section takes an impulsive form, we can expect a total of five waves, and the European currency may well drop below the 1.0000 mark. In recent weeks and months, such a scenario seems unrealistic, and the wave pattern may transform into a more complex one.

An alternative scenario I see now is the transformation of wave 3 or C into a corrective form with five waves of type a-b-c-d-e. Even in this case, the low of wave 3 or C should be lower than the low of wave 1 or A. Consequently, if wave e in 3 or C is now starting to form, rather than 3 in 3 or C, the instrument's decline should still resume.

Is there life after death?

The EUR/USD exchange rate did not change on Monday. However, this lack of change can undoubtedly be considered a positive for the European currency. Instead of the expected correction on Monday, the European currency rose again. Only the morning gap prevented it from increasing in price by the end of the day. Without the gap, we would likely have seen a new rise in the EU currency.

Currently, many analysts are waiting for Jerome Powell to soften his rhetoric. Many economists truly believe that the time has come to start talking about easing monetary policy. If the inflation report this week confirms the downward trend, the probability of a Fed rate cut in September will increase even more. In my opinion, even a decrease in inflation to 3.1% will not mean easing policy in September. 3.1% is still too much. The ECB started lowering the rate at 2.4% inflation. However, this is not important for the market. If inflation falls, the FOMC will begin transitioning to a more "dovish" policy soon, whether it is true or not. Therefore, the dollar should be sold.

However, demand for the euro is constantly growing without this factor, and demand for the dollar is decreasing. So, Jerome Powell's support for the European currency is simply not needed right now. If it appears, the instrument risks skyrocketing and breaking the entire wave pattern.

General Conclusions

Based on the EUR/USD analysis, I conclude that the construction of the downward set of waves continues. In the near future, I expect the downward wave 3 in 3 or C to resume. I continue to consider only sales with targets around the estimated mark of 1.0462, but the current wave structure is very complex and has very deep corrective waves, which should be taken into account. It may become even more complicated soon, but I see no reason to expect the construction of an upward set of waves at this time.

On a larger wave scale, it is clear that the supposed wave 2 or B, which in length amounted to more than 76.4% of the Fibonacci from the first wave, may be completed. If this is indeed the case, the scenario of wave 3 or C construction and the instrument's decline below the 1.0000 figure continues to unfold.

Key Principles of My Analysis:

  1. Wave structures should be simple and understandable. Complex structures are difficult to play out and often change.
  2. If there is no confidence in what is happening in the market, it is better not to enter it.
  3. There is never 100% certainty in the direction of movement. Do not forget about protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.

* Analisis pasaran yang disiarkan di sini adalah bertujuan untuk meningkatkan kesedaran anda, tetapi tidak untuk memberi arahan untuk membuat perdagangan.

Chin Zhao,
Analytical expert of InstaSpot
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