The wave markup of the 4-hour chart for the euro/dollar pair continues to be not quite standard but has practically stayed the same in recent weeks. During these weeks, the quotes started to move away from the previously reached maximums, so the three-wave upward structure can be considered complete. The entire ascending segment of the trend may still take a five-wave corrective view, but at this time, I expect the formation of a new downward segment of the trend, which will also turn out to be a three-wave. Recently, I have repeatedly said that I expect the pair to be near the 5-figure mark, from where the rise of the European currency began.
The upper point of the last trend segment was only a couple of a dozen points higher than the highest point of the previous upward segment. Since December of last year, the pair's movement can be considered horizontal, and this nature of movement will continue. In the past 2–2.5 months, demand for the euro has been constantly growing, but I repeatedly drew attention to the fact that the news background for the euro is not strong enough for it to grow so much in price. However, it is now becoming clear: building a convincing ascending wave set and then building a downward one was necessary.
The ECB's interest rate hike has very limited potential.
The euro/dollar pair increased by ten basis points on Monday and Tuesday, demonstrating very low activity. If on Monday the news was practically absent, then today, there were already several reports that could influence market sentiment. In particular, GDP in the European Union for the first quarter. However, the value of this report coincided with the previous estimate, with the forecasts not affecting the pair. The ZEW Economic Sentiment Index in Germany turned out to be twice as low as expected, but even after that, demand for the European currency did not begin to decrease. But it also continued to grow. We saw more or less interesting movement only in the last few hours.
The other day, the European Central Bank published an article, "Economic Bulletin," that made several interesting conclusions. For example, according to ECB economists, the main impact on inflation will fall in 2024. On average, inflation will decrease by 2% in 2023–2025. The tightening of monetary policy affects economic activity faster than inflation. The peak impact on GDP will fall in 2023. In other words, the ECB expects the worst to happen in 2023 and the best - in 2024. GDP is currently around zero, and the regulator does not expect a sharp drop in this indicator. But it expects that inflation will start to decrease more briskly. It is difficult to draw the same conclusions, although the impact of interest rate hikes stretches for one year or even more. Over time, the consumer price index will decrease, but it may take a lot of time to return to 2%.
Based on the analysis, the formation of the upward trend segment is complete. Therefore, I can now advise sales, and the pair has much room to decline. Targets in the range of 1.0500–1.0600 can be considered quite realistic. With these targets, I advise selling the pair on MACD indicator reversals "down" as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.
On a larger wave scale, the wave markup of the ascending trend segment has taken on an extended form but is likely complete. We saw five waves up, which are most likely the a-b-c-d-e structure. The formation of the downward trend segment may still need to be completed, and it can take any form in terms of structure and length.