FX.co ★ Wave analysis of EUR/USD for July 30. European economy is recovering too slowly

The wave counting of the 4-hour chart for the Euro/Dollar instrument has acquired a more readable and complete form. After the instrument spent several weeks with a minimum amplitude, it still began to increase, which can be considered an independent wave. Thus, at the moment, the supposed wave c is considered completed. If this assumption is correct, then the increase in quotes will continue within the framework of building a new upward trend section, which can take both a corrective and an impulse form. In any case, I expect an increase to the levels of the peaks of the previous wave c. That is, to the level of 1.2240. There are practically no alternative options now. The wave structure a-b-c looks quite convincing, although the internal structures of each of its waves are practically unreadable. I have already said earlier that the main thing is not the accuracy of the wave count, but its clarity for traders. Now the main assumption is that the downward trend has completed its construction.

The news background for the Euro/Dollar instrument was quite important on Friday. Data on GDP has been released in some European countries and throughout the European Union as a whole. In France, GDP grew by 0.9% QoQ, Spain by 2.8% QoQ, Germany by 1.5% QoQ, and Italy with 2.7% QoQ. Despite the fact that all countries showed higher economic growth rates than the markets expected, in many cases, the figures still seem very modest. This is especially true for Germany, which has long been considered the locomotive of the entire European economy. However, just its GDP grew by 1.5% against expectations of 2.0%. In general, the Gross Domestic Product in the European Union grew by 2.0% QoQ, although the markets expected no more than 1.5%. Thus, in general, we can still consider this statistic positive for the European currency.

In addition, the consumer price index rose to 2.2% YoY, and the unemployment rate fell to 7.7%. Thus, most of all reports on the European Union turned out to be stronger than what the markets expected to see. And still, the European currency did not receive the proper level of demand. During the day, on the contrary, there was a decrease in the quotes of the instrument, and the overall amplitude remained quite weak. In the second half of the day, the demand for the euro fell even more, although this was hardly due to the US data. Thus, the instrument shows complete disinterest in reports at this time. Let me remind you that yesterday an important report on US GDP also did not get a special market reaction. Wave analysis is all that the markets can rely on at this time.

Based on the analysis, I conclude that the construction of the downward wave c is completed. Thus, as I said earlier, it is now possible to buy the pair with targets located near the nearest Fibonacci levels. These levels are 1.1919 and 1.1983. I also recommend making purchases for each new MACD signal "up". It should also be recognized that the downward section of the trend may become more complicated and take a longer form. However, I am not considering this option yet.

The wave counting of the higher scale looks quite convincing. We see three three-wave sections of the trend, which are approximately the same in size. This gives reason to assume that the last downward trend section is really completed. If this is true, then we can expect an increase in the quotes of the instrument in the coming weeks by 200-300 basis points.