The wave analysis on the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have seen only three large-scale wave structures that constantly alternate with each other. Currently, the construction of another three-wave structure - a downtrend - which began on July 18th last year is ongoing. The presumed wave 1 is completed, and wave 2 or b has become more complex three or four times but is now also completed.
The upward trend segment may still resume, but its internal structure will be absolutely unreadable in this case. I remind you that I strive to identify clear and unambiguous wave structures that do not tolerate dual interpretations. If the current wave analysis is correct, then the market has moved on to form wave 3 or c. Currently, wave 2 in 3 or c is presumed to be under construction. If this is indeed the case, then the construction of this wave may be completed soon, as it has already taken on a distinctly three-wave form. In any case, this decline in pair quotes should not end here. An unsuccessful attempt to break through the 1.0956 level, which equates to 50.0% on the Fibonacci scale, may indicate the completion of the corrective wave, but the retreat of quotes from the reached peaks is still too small.
The producer price index indicates a new rise in inflation.
The EUR/USD pair's rate declined by 30 basis points on Thursday. Market movements' amplitude remains low, but today American statistics play in favor of sellers. I want to note right away that only three reports were released, two of which worked in favor of the dollar. Only the February retail sales report was slightly weaker than the market expected. But a 0.6% increase in volumes is also good. The number of initial jobless claims increased by 209 thousand, with the market expecting 218 thousand, and the producer price index was 0.6% on a monthly basis. I will focus my attention on the latter report, as I consider it the most important.
If producer prices are rising, it can only mean one thing. Prices for goods in stores will also rise. It should be understood that, in any case, we are talking about the growth of prices for goods or services. The question is only how quickly they are growing. Inflation in America has been slowing down for a year and a half, but in the last six months - very slowly and uncertainly. If the producer price index accelerates (expectations were only 0.3%), this means that inflation may increase in the near future, not decrease. Therefore, the Fed may start easing monetary policy even later than expected. This is a hawkish factor, so today we saw an increase in demand for the US currency. The market made two unsuccessful attempts to break through the 1.0956 level. The chances of transitioning to the formation of downward wave 3 in 3 or c are increasing.
General conclusions.
Based on the analysis of the EUR/USD, I conclude that the formation of a downward set of waves continues. Wave 2 or b has taken on a completed form, so I expect the continuation of building an impulsive downward wave 3 or c with a significant decline in the pair. Currently, an internal corrective wave is being built, which could have already been completed. I continue to consider only sales with targets located around the calculated level of 1.0462, which corresponds to 127.2% on the Fibonacci scale.
On a larger wave scale, it can be seen that the presumed wave 2 or b, which in length exceeded 61.8% on the Fibonacci scale of the first wave, may be completed. If this is indeed the case, then the scenario with the formation of wave 3 or c and the decline in the pair below the 4-figure mark has begun to be realized.
The main principles of my analysis:
Wave structures should be simple and understandable. Complex structures are difficult to play with and often undergo changes. If there is no confidence in what is happening in the market, it is better not to enter it. There is never 100 percent certainty about the direction of movement. Do not forget about protective stop-loss orders. Wave analysis can be combined with other types of analysis and trading strategies.