A wave layout of the 4-hour chart still looks convincing for EUR/USD without any changes. Expected wave 4 is already complete. The trading instrument is keeping on with wave 5 inside E. If this is the case, EUR is likely to extend its decline for a few weeks ahead. The wave might develop an elongated shape and a 5-wave internal structure. On the other hand, it might get shorter than usual. For a while, we cannot consider wave E complete because its internal wave structure excludes such a conclusion. Thus, the trading instrument maintains bearish momentum. The first downward target is seen at 1.0721 that matches the 200.0% Fibonacci level. A failed attempt to break this level could push the price up off its lows and create internal correctional wave 5 inside E. The outlook for EUR/USD in the coming weeks will depend on a variety of factors: economic data, geopolitics, oi and gas prices, new sanctions on Russia from the US and the EU.
Kremlin submits amended draft for peace talks to Kyiv
EUR/USD grew 10 pips on Tuesday and gained another 50 pips on Wednesday. In means than demand for the single European currency is on the rise. Nevertheless, the currency pair is still unable to build an uptrend section or a strong bullish wave despite the fact that the current trend section could be complete if wave 5 inside E gets shorter than usual. The upward move today has nothing to do with the economic calendar. During the early European session, the EU reported that its industrial production expanded by 0.7% on month and by 2.0% on year. One of the readings was worse than expected and the other one was a bit better. It was the only report worth of attention, but the market took little notice of it.
The market probably responded to the statement of Dmitry Peskov, who said that new proposals for a peaceful solution to the conflict had been submitted to Kyiv. From my point of view, the interpretation of "peaceful settlement" in itself no longer corresponds to reality, but this give a faint hope for the completion of the hostilities. Yesterday I said that the active stage of the "second phase" can be over in about 1-2 weeks. But many military analysts suppose that active hostilities in the Donbas can continue for 3-6 months. In this case, a peace treaty would be most welcome. Meanwhile, Kyiv and Moscow are now engaged in kind of throwing the tennis ball over the net to the other side. Adviser to the President of Ukraine Mikhail Podolyak said that his delegation voiced and sent to the Russian Federation its proposals for resolving the conflict back in Istanbul. Now the Russian side has sent its proposals to Kyiv. They will be scrunitized for several days, after which the Ukrainian side will send new proposals and its response to Moscow. Since we do not know what exactly these proposals are about, no conclusions can be drawn about the outcome of the negotiations. But it seems that the issues of Crimea and Donbass will remain unresolved.
Conclusions
Based on the analysis conducted, I draw a conclusion that building wave 5 inside E is still underway. If so, it is still good time to sell EUR/USD with targets at around 1.0721 that corresponds to the 200.0% Fibonacci level. Sell the pair at every downward signal from the MACD indicator. Correctional wave 5 inside E could appear in the new few days. Once it is finished, I expect a new bearish wave in EUR/USD.
On a larger scale, it is clearly seen that expected wave D is complete. The currency pair is making lower lows. To sum it up, wave 5 of the non-impulsive downtrend section is coming into shape now. It could be as extended as wave C. If this assumption is true, EUR/USD is set to trade lower.