FX.co ★ EUR/USD analysis on March 23. Bullard's comments hurt the euro currency

The wave marking of the 4-hour chart for the euro/dollar instrument still does not change and looks convincing. At this time, the construction of the proposed wave E is continuing, which should take a five-wave form. The low of the previous wave was broken, so the construction of a downward trend section continues. Since wave E has already taken on a sufficiently extended form, a scene appears in which the construction of this wave will soon be completed. However, so far, the internal wave marking of wave E indicates that only wave 4 has been completed and the construction of wave 5 has begun. Wave 4 has taken a clear three-wave form and is much more massive than the corrective wave 2. If it becomes even more complicated, it may call into question a further decline in the quotes of the instrument. This wave can take the five-wave form a-b-c-d-e, but its appearance, in this case, will be very much out of the general wave pattern. Therefore, I expect that the decline in quotations will continue with the targets located near the 7th figure. I am not considering alternative options yet, since there are no serious violations in the current wave marking.

For everything, the Fed supported a rate hike of 25 bps.

The euro/dollar instrument fell by 60 basis points on Wednesday. Thus, it is more and more likely that the construction of a descending wave 5 has begun. The news background at the beginning of this week was very interesting and important for the US dollar, as well as for its buyers. At first, Jerome Powell said that price stability is now a top priority, which means the Fed is ready to raise the rate 6 more times this year. A little later, he said that "if the need arises," the rate will increase by more than 25 bps at a time. To top it all off, James Bullard, one of the voting members of the Fed, said that he did not support a 25-point rate hike at the March meeting and called for raising the rate by 50 at once. All this is the so-called strengthening of "hawkish" rhetoric.

The Monetary Policy Committee has 12 voting members. Even if several of them believe that monetary policy should be tightened faster, this says a lot. Namely, this indicates that in America everyone understands a simple fact better: the longer you just look at inflation, the more it will grow, the more difficult and longer it will then be to return it to the target level. Therefore, some FOMC members are now calling for raising rates as soon as possible. In particular, the same Bullard said that the overnight loan rate should be raised immediately to 3%. That is, in any case, we are talking about a much higher position of all rates in the American economy. And the demand for the dollar continues to grow on this news. The demand for it has already been great in recent weeks and months, but the news background is such that the reasons for the market to buy American currency are only getting bigger over time. This market behavior fully corresponds to the current wave markup, which assumes the construction of at least one more descending wave.

General conclusions

Based on the analysis, I conclude that at this time the construction of wave E continues. If so, now is still a good time to sell the European currency with targets located around the 1.0723 mark, which corresponds to 200.0% Fibonacci, for each MACD signal "down". The current wave layout still assumes the construction of wave 5 in E.

On a larger scale, it can be seen that the construction of the proposed wave D has been completed, and the instrument has already updated its low. Thus, the fifth wave of a non-pulse downward trend section is being built, which may turn out to be as long as wave C. If this assumption is correct, then the European currency will still decline.