The wave analysis on the 4-hour chart for the euro/dollar instrument remains quite clear. Over the past year, we have observed only three wave structures, which constantly alternate with each other. In recent months, I have consistently stated that I expect the instrument to reach around the 1.5 figure, from which the construction of the last ascending three-wave structure began. This target was achieved after a two-month decline. Following the achievement of this goal, the construction of a corrective wave 2 or b began, which has already taken on a clear three-wave structure.
None of the recent price increases resembled a full-fledged wave 2 or b. Therefore, all of these were internal corrective waves in wave 1 or a. However, this does not mean that the overall decline of the European currency is over because, in any case, the construction of the third wave is required. Inside the first wave, there are five internal waves, so it is complete. Inside the second wave, there are three waves, so it might also be complete. However, it could still take the form of a-b-c-d-e.
The ECB failed to support euro demand.
On Thursday, the euro/dollar currency pair declined by an additional 20 basis points. The situation can still change by the end of the day, as the market's reaction to the ECB meeting, Christine Lagarde's statements, and U.S. statistics can extend over several hours or even more. Therefore, it's better to refrain from drawing hasty conclusions, at least until tomorrow. For now, only initial conclusions can be drawn. Euro demand increased for a moment, but it only rose by 25 basis points. The ECB left interest rates unchanged, so there was no significant event for the markets to react to. However, in the United States, very strong reports on GDP and durable goods orders were released, which should have caused a significant U.S. dollar rally, but the market considered the ECB meeting more important and didn't understand how to react. To be more precise, the dollar received an additional reason to build a new downward wave.
It was clear that the European regulator would not raise rates yesterday, a week ago, or a month ago. Therefore, there was no reason for the market to increase demand for the euro. Of course, any instrument moves in waves, and an upward corrective wave may coincide with weak statistics from the EU or strong statistics from the United States. As a result, we may see an upward movement of the instrument when it should be falling. However, let's not forget that wave 2 or b has not been guaranteed to be completed yet. It may take on a more prolonged and complex form. So, the rise of the euro can be entirely explained.
Based on the analysis conducted, it can be concluded that the construction of a bearish wave set continues. Targets around the 1.0463 level were perfectly achieved, and an unsuccessful attempt to break this level indicated a shift to the construction of a corrective wave. A successful attempt to break the 1.0637 level, corresponding to 100.0% according to Fibonacci, indicated the market's readiness to complete the construction of wave 2 or b. Therefore, I recommended selling. However, these sales should be cautious at first, as wave 2 or b may take on a more complex form.
On a larger time scale, the wave labeling of the ascending trend section took on an extended form, but it is likely already complete. We observed five upward waves that are most likely a structure a-b-c-d-e. The instrument then built four three-wave structures: two downward and two upward. Currently, it has probably moved into the stage of constructing another extended three-wave downward structure.