FX.co ★ EUR/USD analysis on December 6, 2021. Markets down on disappointing NFP data

Wave pattern

The wave layout for EUR/USD on the 4-hour chart remains complete and does not require any changes. The a-b-c-d-e section of the trend, which was formed at the very beginning of the year, should be interpreted as a wave A, and the subsequent rise in the instrument is seen as a wave B. Thus, the formation of the assumed wave C continues and can take a very extended form. At the same time, we can assume that the formation of the new ascending wave has been completed, presumably the wave d in C. If the current layout is correct, the C wave may take a five-wave corrective structure. Therefore, I expect to see another descending wave e in C. A successful attempt to break through the 100.0% Fibonacci level will indicate that the market is ready to go short on the instrument. So, the d wave may soon be completed. The pair may continue to fall throughout the week towards the estimated target of 1.1152 which corresponds to the 127.2% Fibonacci retracement. This is where the entire trend section may complete its formation.

US Nonfarm Payrolls failed to support USD

The news background for EUR/USD was very strong on Friday as it was marked by the publication of the US Nonfarm Payrolls report which is always a big event for the markets. However, traders were disappointed by the data since the pair passed the distance of just 60 pips from high to low. Moreover, the euro/dollar pair closed the day at the opening levels. Thus, the US economic data did not affect the trading on Friday, as well as the wave picture. I must point out that payrolls were far below market expectations. Only 210K new jobs were added instead of 550K expected. But at the same time, the unemployment rate fell from 4.6% to 4.2% which is certainly good news for the American currency. The reports on business activity and wages were also strong. However, the pair did not resume its fall. So I expect the downtrend to start this week because the d wave has taken a distinct three-wave form. Therefore, I am waiting for a new descending wave within the wave C. In my opinion, the wave analysis is the best method at the moment to show the future trajectory of the pair. This week, the news background will be extremely weak, so it will be difficult for the US dollar to find reasons for a new rise.At the same time, the formation of the wave c in C continued for three weeks. Therefore, the formation of the wave e can also take longer, and the quotes may not decline in the next few days.

Conclusion

Based on the analysis above, I can conclude that the formation of the descending wave C is likely to be completed. However, the internal structure of the assumed wave d suggests that another descending wave e may start to form soon. So, I recommend selling the pair with the targets at 1.1152. The Stop Loss order should be placed above the 100.0% Fibonacci level.

Higher time frame

The wave layout on the higher time frame looks quite convincing. The quotes continue to move lower. The descending section of the trend that was initiated on May 25 takes the form of a three-wave correctional pattern A-B-C. This means that the downtrend may continue for another month or two until the C wave is fully completed. It can have either a three- or a five-wave structure.