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23.03.202318:46 Forex Analysis & Reviews: EUR/USD. Analysis for March 23. The dollar fell even further as a result of Jerome Powell's actions

Exchange Rates 23.03.2023 analysis

The recent increase in the euro's value has caused some confusion in the wave analysis on the 4-hour chart for the euro/dollar pair. We saw a dramatic decrease in quotes last week, which may be seen as the start of wave C. The decrease, however brief, was quickly followed by a rise in demand for the euro. There are now two potential outcomes as a result. Wave B will either take a five-wave corrective form or the wave pattern as a whole will shift, allowing the upward part of the trend to resume developing. The market mood has been significantly impacted by news over the past two weeks, which explains why there are occasionally unanticipated movements in the pair. Trading would likely progress more in line with the wave pattern if there were no economic data and significant US and EU banks declaring bankruptcy. Instead, we have a chance to miss the promising development of a downward wave. The only thing left to do in the current circumstances is to watch the developments.

The Fed increased the rate by a quarter point.

On Wednesday, the euro/dollar pair rose by 90 basis points, and today it increased by an additional 30. Since more than a week ago, there has been a steady rise in demand for the euro. The markets have been acting in this manner for several perfectly reasonable reasons. Perhaps there were other ways that the information could have been understood, but this is a matter for the market participants, not for us. For instance, the Fed's decision during its second meeting of the year became public last night. Jerome Powell was able to simultaneously suggest a potential halt in tightening monetary policy and presume that the rate would increase several more times in his statement after the rate increased by 25 basis points. And after all, he cannot even be held responsible for such a vague interpretation. Inflation in the United States has been decreasing for 7 months in a row, falling from 9.1% to 6%, giving the Fed the right to be more cautious in its statements today. The impact of rate increases can last anywhere between three and six months, so even the present rate may be sufficient to bring inflation down to 4.5-5%. The Fed does not have to maintain its "hawkish" attitude in such situations.

The rate could, however, increase more if inflation begins to slow down. The market paid more attention to Powell's first statement and disregarded his second. Thus, wave B barely seems to be represented by the current increase in quotes. Most likely, we have already observed the entire pattern of the a-b-c waves. After an impressive formal correction, the pair will either start developing the upward trend part again, or it will build three waves up and then three down, which together will result in a stronger three-wave downward corrective. I anticipate the second scenario since I don't see any compelling arguments for the European currency to increase in value.

Exchange Rates 23.03.2023 analysis

Conclusions in general.

I draw the conclusion that the upward trend section's development is finished based on the analysis. However, the wave analysis for the euro is confusing right now, making it challenging to determine where the pair is concerning the trend. The development of a new three-wave structure of waves down can start even after one wave up (which may be wave b). I continue to plan for exactly such an event. With targets for sales close to the 38.2% Fibonacci level, I suggest being cautious.

On the older wave scale, the upward trend section's wave pattern has grown longer but is likely finished. The a-b-c-d-e pattern is most likely represented by the five upward waves we observed. The downward part of the trend is already taking form and can have any kind of structure or extent.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Chin Zhao,
Analytical expert of InstaSpot
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