FX.co ★ EUR/USD. Analysis for January 11. Isabelle Schnabel: Inflation will not decrease by itself.

The wave marking on the euro/dollar instrument's 4-hour chart is still quite compelling and getting more intricate, and the entire upward segment of the trend is still quite convoluted. It now has a clearly corrected and greatly expanded appearance. The waves a-b-c-d-e have been combined into a complicated corrective structure, with wave e having a form that is far more complex than the other waves. Since the peak of wave e is substantially higher than the peak of wave C, if the wave markings are accurate, construction on this structure may be nearly finished. I'm getting ready for a decrease in the instrument because, in this scenario, we are predicted to build at least three waves down. The demand for the euro currency surged once more in the first week of the year, and the instrument was only able to retreat slightly from its peaks. A new unsuccessful attempt to surpass the 1.0726 level, which corresponds to the 200.0% Fibonacci level, could signal the conclusion of the formation of the upward trend section now in place. However, just like previously, US dollar demand must increase rather than decline. Regrettably, the market has had significant issues with this up to this point.

The ECB will likely keep raising rates.

On Tuesday, the euro/dollar instrument increased by 10 basis points, but the fluctuations had very little amplitude. After the European currency increased by more than 100 points on Friday, the market genuinely took a day off. On Monday, there was still some momentum, but it gradually waned on Tuesday. The instrument has updated the previous peak and is now back at the 200.0% Fibonacci level. Because the price was precisely 10 points above this level the entire day before, I cannot say that an attempt to break through it was successful. While the news environment does not elicit the requisite emotions among market participants, I have long anticipated the development of a negative trend. Although the European currency doesn't always find support in the headlines, it almost always does so in the market. Except for a speech by Jerome Powell, who didn't say anything particularly intriguing, there was no background news yesterday.

I must, however, point out that there is a chance that demand for the euro currency will continue to rise. The truth is that in the early weeks of the new year, reports started to surface that the ECB would keep raising interest rates in step with the Fed until they reached the level required to stop inflation. High rates will be advantageous in the medium and long terms since price stability will be attained, according to ECB Governing Council member Isabel Schnabel on Tuesday. She also pointed out that, despite high rates, the European Union should continue its transition to "green" energy sources because inflation will not return to normal levels on its own. I should point out that other ECB members agree that the need to continue tightening monetary policy exists.

Conclusions in general

Based on the analysis, I conclude that the five-wave building of the upward trend section has grown more intricate and is almost finished. As a result, sales with goals close to the anticipated 0.9994 level, or 323.6% Fibonacci, can now be taken into account. A failed attempt to break through the 1.0726 level suggests that the instrument may decrease in the upcoming weeks, however, it is possible to complicate and lengthen the rising portion of the trend. The likelihood of this scenario is still relatively strong.

The wave marking of the descending trend segment notably becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e structure is most likely represented by the five upward waves we observed. After the construction of this portion is complete, work on a downward trend segment can start.