The wave counting of the 4-hour chart for the Euro/Dollar instrument became more complicated over the last working day of last week. The news background led to a fairly strong decline in the quotes of the instrument, which continues in the first days of the new week. The quotes of the instrument fell below the low of the previous wave, so now we can definitely conclude that the wave counting has been transformed into a five-wave type a-b-c-d-e. If this is indeed the case, then the last wave e is already nearing its completion. And it can end between the low of wave c and the 100.0% Fibonacci level. An unsuccessful attempt to break through the level of 1.1704 will indicate that the markets are not ready for further sales of the European currency and are ready to build a new upward trend section. I would also like to draw your attention to the fact that in 2021, the Euro/Dollar instrument builds only corrective sections of the trend and only within the range of 1.1700 – 1.2350. Thus, as long as the quotes remain inside this area, it is very difficult to expect the construction of an impulse section of the trend.
The news background for the Euro/Dollar instrument was weak, or rather, almost absent on Monday and Tuesday. There were no economic reports in the first two days either in the United States or in the European Union, but several speeches by members of the Fed board were held in America at once. The presidents of the Federal Reserve Bank of Atlanta, Richmond and Boston made speeches. In general, each of them said that the inflation rate is already high enough to start discussing the end of the QE program and raising rates. In addition, everyone noted the high pace of recovery of the labor market in recent months and reported that if they continue, it will be possible to talk about the completion of the QE program this fall. This information gave strength to the US currency, and during Monday and Tuesday it strengthened by 45 basis points. Not very much, but, as I said, the news background was still weak. Hawkish statements by the presidents of the Federal Reserve are, of course, good for the dollar, but these are just words for now.
Nonfarm Payrolls has indeed shown very high values in the last two months, but this does not mean that this dynamics will continue in August and September. Rumors that the Fed may start discussions about ending the stimulus program have been going around for several months, but Fed Chairman Jerome Powell only once mentioned the phrase that the regulator may start discussing curtailing the asset purchase program. And lately, he hasn't said anything like that at all. Rather, on the contrary, he argued that the economy and the labor market still need to be stimulated. Therefore, the dollar receives only light market support.
Based on the analysis, I conclude that the construction of the downward wave c is completed, but the construction of the downward trend section has resumed. I expect the completion of the construction of wave e and the entire trend section around the 1.1704 mark, which is equal to 100.0% by Fibonacci. A successful attempt to break through this level will indicate the readiness of the markets for further sales of the instrument. In this case, the wave e may take a more complex and extended form, and it will be possible to sell the instrument with targets located near the 1.1551 mark, which corresponds to 127.2% Fibonacci.
The wave counting of the higher scale looks quite convincing. We see three three-wave sections of the trend, which are approximately the same in size. However, the last section of the trend quite unexpectedly began to take a more complex form, but it may still end in the near future.