For the time being, a wave layout on the 4-hour chart of EUR/USD still doesn't have to be fine-tuned despite the fact that the price growth within expected wave 4 is taking a longer time. A new wave layout doesn't embrace an upward wave drawn by the red bold line. The whole wave structure could get more complicated again. It is a disadvantage of wave analysis because any wave structure might get more complicated and lengthy. Now, what we are observing is that anew upward wave is in progress that could be wave 4 of the new downtrend section. If the assumption is true, the currency pair is likely to complete it in the near time and to begin the development of wave 5. Suggested wave 4 already consists of 5 parts. A failed attempt to break the level of 1.0356 that matches the 261.8% Fibonacci retracement might indicate that the correctional wave is over. If this level doesn't restrain the pair's upward move, the whole wave structure might be revised because the peak of wave 4 will go beyond the low of wave 1.Even in this case, the wave structure could retain its integrity, but it will lose its impulsive nature.
US inflation slows down. Could it be by accident?
EUR/USD spiked 110 points on Wednesday. No doubt, the euro owes its reinforcement to the US CPI report that was released a few hours ago. For this short time, demand for the US dollar shrank, allowing the euro to grow more than 100 pips. Let me remind you that the trading instrument was locked inside a range on Monday and Tuesday amid the empty economic calendar. Now investors are trying to puzzle out how the market will move post-CPI. Today the market detected the first signs of a slowdown in inflation. Could it be the first step toward the target level of 2%?
What if a decline in consumer inflation in July happened at random? Last week, some Fed policymakers said that inflation had not reached its peak yet. In the UK, analysts expect the CPI to accelerate further to 13% and advise the authorities to be braced for a recession. If the CPI in the US goes down month after month, it will look too smooth. Besides, I assume that the Federal Reserve will not give up its plan to increase the funds rate to 3.5 – 4.0%. Only the fourth or fifth round of monetary tightening pushed inflation down. Nevertheless, it doesn't guarantee that the CPI will decline every month afterwards. Inflation could settle at 8% in annual terms which cannot please the US Fed. Therefore, I reckon that the FOMC will go ahead with rate hikes until inflation declines to 4-5% on year. In this case, demand for the US dollar will boost again. This will enable us to build wave 5 within the ongoing downtrend section. After this section is complete, the currency pair could develop an upward section. The thing is to determine when exactly it will begin. It is too early now to plot the upward section.
Conclusion
According to my wave analysis, I make the conclusion that the downtrend section is still in progress. If so, we can sell the trading instrument with the targets at around 0.9397 which matches the 423.6% Fibonacci level. We should sell at each MACD's down signal, bearing in mind ongoing wave 5. In case of a successful breakout of the 261.8% Fibonacci level, the viable sell trading plan could be cancelled.
On a senior timeframe, the wave structure of the downtrend section is getting more complicated and elongated. The section might be extended and look lengthy. My idea is to recognize three- and five-wave standard sections from the whole picture and plan positions with their help.