The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. The ascending trend, which began its development last year, has taken on a complex structure, and over the past six months, we have seen only three wave structures alternating. I have regularly mentioned that I expect the pair to reach around the 1.5 figure, from where the construction of the last upward three-wave structure began. I still stand by my words. Another ascending three-wave structure is completed, so the market continues to build a downward trend.
The recent increase in quotes looks like a partial-fledged wave 2 or b. We saw a similar wave from August 3rd to August 10th. Most likely, this is an internal corrective wave in 1 or a. If this is indeed the case, the decline in quotes will continue for some time within the framework of the first wave of the descending trend, and this wave will take on quite an extended form. The decline of the European currency will not be over at this point, as the construction of the third wave is still required.
Tuesday surprised with market activity.
The exchange rate of the euro/dollar pair fell by 90 basis points on Tuesday. There can only be two reasons why this happened. I want to remind you that yesterday, Christine Lagarde tactfully avoided answering a question about the interest rate at the next ECB meeting, giving rise to a whole bunch of hypotheses about a pause and the end of the process of tightening monetary policy. There was no immediate reaction to this event yesterday, but I suggested that it could negatively affect the euro in the future. This is the first possible reason. The second one is wave-related. As I mentioned earlier, the first wave of the new descending trend appears to be incomplete, which means the pair may continue to decline even without news background. However, very few reasons exist for an increase in the pair's value. They were present last week but not on Monday and Tuesday.
In August, the Business Activity Index for the service sector in Germany was 47.3 points. The Business Activity Index for the service sector in the Eurozone in August was 47.9. Both indices dropped from "above 50" to "below 50." This is a very important point that could have been the third possible reason for the euro's decline on Tuesday if these changes had not been known two weeks ago. I want to remind you that business activity indices are published in two estimates. Therefore, the first estimates have already shown what to expect in August. Therefore, these reports were not the reason for the euro's decline. It started two hours before their release.
Based on the analysis conducted, the construction of the upward set of waves is complete. I still consider the targets around 1.0500-1.0600 quite realistic. Therefore, I recommend selling the pair with targets around 1.0637 and 1.0483. A successful attempt to break through the 1.0788 level indicates the market's readiness to continue selling. We can expect the achievement of the abovementioned targets, which I have discussed for several weeks and months.
On the higher wave scale, the wave marking of the ascending trend has taken on an extended form but is likely completed. We have seen five upward waves, most likely the structure of a-b-c-d-e. Then, the pair formed four three-wave structures: two downward and two upward. It has entered the stage of building another descending three-wave structure.