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11.06.202416:09 Forex Analysis & Reviews: Analysis of EUR/USD pair on June 11, 2024

The wave pattern on the 4-hour chart for EUR/USD remains unchanged. We are currently observing the formation of the presumed wave 3 of 3 or c of the downward trend segment. If this is indeed the case, the decline in quotes will continue for quite some time, as the first wave of this segment completed its formation around the 1.0450 mark. Consequently, the third wave of this trend segment should end lower.

The 1.0450 mark is the target for the third wave only. If the current downward trend segment turns out to be impulsive, we can expect a total of five waves, and the euro could drop below the 1.0000 mark. While such an outcome is hard to predict right now, the currency market has seen plenty of surprises in recent years.

Is there a chance of a change in the wave pattern? In recent weeks, the pair has mostly been rising, but sooner or later, the market will have to take into account the ECB's initiation of monetary policy easing, which should reduce demand for the euro. A successful attempt to break through the 1.0788 mark significantly boosts confidence in this scenario.

The ECB positively assesses the results of high rates.

The EUR/USD pair dropped another 30 basis points on Tuesday. This is not much, but for the euro, in the absence of a news background, movements of 20-30 points are the norm. There were no economic publications today. However, I can highlight the speech by ECB Governor Olli Rehn, who stated that he is pleased with the results of the hawkish monetary policy pursued over the last two years. According to him, price pressure has significantly weakened, and substantial progress has been made in reducing inflation to the target level.

Olli Rehn's words indirectly allow the market to continue reducing demand for the euro. If price pressure has weakened, then the ECB may continue to lower interest rates. Despite Christine Lagarde's statement last week about expecting to reach the target level only by 2025, it is now clear to the market that the current level of consumer prices allows for further policy easing.

Based on the above, I believe the ECB will continue to lower interest rates. The next round may occur in September. However, this does not mean that the euro will stand still until then. Demand for it may gradually decrease over this period. The downward trend segment was at risk for a while, but that risk has now passed. I expect a decline to the 100.0% Fibonacci level, a successful attempt to break through, and a further fall of the pair.

General Conclusions

Based on the conducted analysis of EUR/USD, the formation of the downward wave set continues. In the near future, I expect the resumption of the formation of an impulsive downward wave 3 of 3 or c, with a significant decline in the pair. I continue to consider only sales with targets around the calculated level of 1.0462. A successful attempt to break through the 1.0788 mark, equivalent to 76.4% on the Fibonacci scale, adds confidence that the market is ready for the formation of the downward wave 3 of 3 or c.

On a higher wave scale, it is visible that the presumed wave 2 or b, which was more than 76.4% of the first wave in length, may be complete. If this is indeed the case, the scenario of forming wave 3 or c and a decline of the pair below the 1.0400 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 change.
  2. If there is confidence in the market situation, it is better to avoid entering.
  3. There is never 100% certainty in the direction of movement. Always remember to use protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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