FX.co ★ EUR/USD analysis on July 17. The pair could start building a corrective wave

A few weeks ago, the wave markings on the 4-hour chart for the euro/dollar instrument got more complex and no longer had a holistic appearance. There was a successful attempt to break through the 261.8 percent Fibonacci level, which was also the low point of the waves E and b. Hence, these waves are no longer E and b. Thus, I have constructed a new wave markup that does not yet account for the ascending wave indicated by a bold red line. I've already stated that the entire wave structure can be complicated indefinitely. This is the drawback of wave analysis, as any structure is always capable of assuming a more complicated and extensive shape.

Consequently, I propose to now focus on simpler wave structures, including waves of a smaller scale. As can be seen, the formation of an upward wave, which may be wave 4 of a new downward trend segment, has begun. If this prediction is right, the instrument's drop will resume within wave 5 with objectives positioned below 1.0000 after an additional 100-150 basis points gain. So far, I see no reason to anticipate additional instrument moves.

The euro surpassed parity with the dollar in terms of value.

On Monday, the euro/dollar pair increased by 65 basis points. There was no news background on this day, but the market is still unwilling to wait for new inflation data or a new central bank meeting. If not for the wave that does not fit into the broader wave picture, I would conclude that the market is currently trading based only on wave analysis, with no regard for the news background. However, this is certainly not the case, and it is also impossible to dismiss the significant influence of waves. This week, something may occur that markets have anticipated, believed, or hoped for a very long time. Since 2008, the ECB may raise the interest rate for the first time. I do not believe this will instantly lead to a surge in demand for the euro and the formation of a new upward trend segment, but the event is nonetheless extraordinary and consequential.

Allow me to remind you that the ECB has nearly reached an impasse. Now that inflation has reached 8.6 percent, there is no alternative but to increase the rate. However, this action should have been taken at the start of the year, when inflation was only beginning to accelerate. But at that time, the Ukrainian-Russian conflict began with uncertain repercussions for the European economy, and the ECB was hesitant to take chances in such a precarious circumstance. In addition, we are all aware of the Fed's actions: the rate is raised at each meeting, but inflation continues to climb. Perhaps the European Central Bank was not erroneous in delaying a rate hike. What difference does it make if inflation rises due to an increase in the interest rate or not? Recent quarters have shown relatively feeble growth for the European economy, and the tightening of monetary policy may be the final nail in its coffin. Moreover, the European Union does not need a strong euro.

General conclusions

I infer based on my findings that construction of the downward trend segment continues. Consequently, it is now viable to sell the instrument with goals near the predicted mark of 0.9397, which corresponds to 423.6 percent Fibonacci, for each "down" MACD signal, based on the building of wave 5. A failed effort to surpass the level of 323.6 percent signals the temporary unavailability of the market for new sales and the commencement of corrective wave 4. Consequently, you may also await the conclusion of this wave before resuming sales.

At the larger wave size, the wave marking of the descending trend segment becomes considerably more complex and extends in length. It can assume virtually any length. Thus, I believe it is best to concentrate and focus on three and five-wave conventional wave structures at this time.