The EUR/USD instrument has been immobilized in the final days of the current year. The upward wave e has already assumed a sufficiently extended form and should be finished, so the market sees no reason to start building a correction wave at this time. Although there hasn't been much news this week, some information has been received. Luis de Guindos, who serves as Christine Lagarde's "right hand," in particular, spoke twice this week. He stated on Monday that he had no idea how much higher ECB rates would go or how high they could go. Such statements from one of the founding members of the ECB, in my opinion, do not boost public confidence in the euro. I'm sure that the demand for the euro currency would be waning right now if the market hadn't taken its vacation earlier than expected. Just as the British pound, which also constructed a sizable wave e but has already begun to decline, is being hit by it.
Luis de Guindos provided new commentary on monetary policy on Thursday, stating "The ECB will raise interest rates "at such a pace" for a predetermined period." We mean a step of 50 basis points when we say "at this rate," as was the case at the meeting in December. I'm not sure what is meant by "a certain time," though. Both "two more meetings" and "five more meetings" can be meant by this expression. The market must, however, be aware of the potential magnitude of the rate increase. Since its limit value of 4% and 6% differs, the market response and the euro exchange rate will also vary. In other words, de Guindos omitted to address the crucial issues.
He asserted that the EU economy could contract by 0.2-0.3% by the end of the fourth quarter, which could signal the start of a recession. Let me remind you that two consecutive "negative" quarters at the beginning of this year, despite strong growth in the third, could have signaled the beginning of the US recession. In contrast, the economy in Britain and the EU grew only moderately in the first two quarters, shrank in the first quarter of the third, and may shrink in the second quarter of the fourth. As a result, both European economies could experience negative economic growth, which would require central banks to exercise greater caution in tightening monetary policy. In America, there are no such issues at the moment, and the rate is already getting close to its final value. The Fed no longer needs to raise rates by 75 or 50 basis points at each meeting, even though the recession may start in 2023. This situation, in my opinion, will affect the dollar in the coming month or two. This assumption fits the current wave markup very well, as a decrease is anticipated for both instruments.
I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a strong likelihood that the upward portion of the trend will become even more extended and complicated, there is currently a signal to turn lower.
The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the current construction of a downward trend section, I am unable to advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. Wave e is likely finished, though it could take on an even longer form.