The wave analysis of the 4-hour chart for the euro/dollar pair remains somewhat unconventional but reasonably understandable. The ascending trend segment, which started on March 15th, could have a more complex structure. However, a downward trend segment is likely forming, consisting of three waves. I have consistently mentioned the expectation of the pair reaching around the 5th figure, where the upward three-wave structure began to form. I am not retracting this statement at this time. The presumed wave b may have completed its formation this week, indicated by the retreat of quotes from recent peaks over the past few days.
An alternative wave analysis has been developed considering recent events, particularly the movements of the GBP/USD pair. This analysis suggests that the entire trend segment between March 15th and April 26th represents a single wave a. If this is the case, the next wave would be b, and the current observation would be the formation of an upward wave c. In this scenario, the wave analysis aligns with the British pound and the euro, indicating further movement towards the 11th figure and beyond.
Business activity in the Eurozone continues to decline, as evidenced by Friday's unexpected 65 basis points decrease in the euro/dollar exchange rate. The decline began overnight and persisted into the morning. Reports on business activity in various sectors within the European Union were released in the morning. It was revealed that both the manufacturing and previously high-performing services sectors are experiencing declines, disappointing the markets. However, it is not ruled out that other factors may contribute to the decrease in demand for the euro currency.
The decline in business activity in the services and manufacturing sectors of the EU can be attributed to the aggressive monetary policy of the European Central Bank (ECB). Despite the interest rate in the European Union being lower than that of the UK or the US, it has significantly increased over the past year with nine rate hikes. Therefore, the current situation results from actions taken by the European regulator. Business activity indices are often considered leading indicators, painting an unfavorable picture of the European economy. If indicators such as industrial production volumes, economic growth, and retail sales continue to decline, the ECB may decide to conclude its policy tightening program. Some Central Bank's Governing Council members already have doubts about the interest rate continuing to rise this autumn, despite high inflation.
In conclusion, based on the analysis, it is inferred that forming a new downward trend segment is ongoing. The pair has ample room for further decline. Targets around 1.0500-1.0600 are considered realistic, and selling the pair with these targets in mind is recommended. There is a reasonably high probability of wave b completing its formation, as indicated by the two "down" signals formed by the MACD indicator. According to the alternative analysis, the current wave may be more extensive, but the formation of a downward trend segment will follow it. Therefore, buying at this time is not recommended.
On a larger wave scale, the wave analysis of the ascending trend segment has taken on an extensive form, but it is likely to complete. There have been five upward waves, most likely forming the structure of a-b-c-d-e. The pair then formed two three-wave structures, one downward and one upward. It is likely in the process of constructing another downward three-wave structure.