FX.co ★ EUR/USD Analysis for May 9. Euro targets the 5th figure

The wave analysis of the 4-hour chart for the euro/dollar pair continues to get confused due to the latest ascending waves, but it has stayed the same in recent days and weeks. These waves can be an independent upward trend section (since the last downward one can be considered three-wave and completed), and they can also be nearing completion if they take a three-wave form. Thus, the wave picture for the euro currency can be very complex, and it isn't easy to work with it. At the current positions, the formation of the upward wave set may end as the third wave's peak goes beyond the first peak. The same thing we saw in the last downward formation (minimal low update and section completion).

At the same time, there are other options for wave analysis. For example, a full-fledged five-wave (but still corrective) structure. It is advisable to rely on the scenario with a decrease in the pair because the ascending three-wave structure looks complete and finished. Therefore, soon, the formation of a new downward three-wave structure may begin. However, a new successful attempt to break through the 1.1030 mark will indicate the market's readiness for new purchases.

The euro currency retreats.

The euro/dollar pair fell by 50 basis points on Tuesday. The amplitude of price changes is still quite low, clearly visible in the last few weeks on any chart. The movement is almost 100% horizontal, so a downward movement of 50 points cannot lead to a clarification of the wave analysis. In other words, it is now impossible to conclude that the formation of the upward wave set is complete. However, the wave analysis has been indicating this for several weeks already. The ascending section may have ended or has already ended, as I do not see any serious reasons to increase the demand for the euro further. However, these reasons can be found or appear – everything changes quickly in the market.

So far, I only see a decline in quotes, which may end today or tomorrow. There is virtually no news background for the pair today, but the US inflation report will be released tomorrow. The market expects a minimal slowdown in consumer prices in April, which may lead to another FOMC rate hike. As before, the principle works: weak inflation decline – increased probability of a new interest rate hike. Therefore, a weak inflation slowdown is very good for the US currency, which has experienced serious problems recently. But are they serious?

By and large, the pair has only recovered to the levels that reached their peak over the past year in the last two months. The Fibonacci level of 0.0% is the peak of the previous upward trend section, and it is around it that the formation of the latest upward wave set is complete (so far). As I said, forming a three-wave downward trend section with targets around the 5th figure can begin.

General conclusions.

Based on the analysis, the formation of the upward trend section is nearing completion or is complete. Therefore, now it is possible to advise sales, and the pair has quite a large space for a decline. I think the targets in the 1.0500–1.0600 can be considered quite realistic. With these targets, I advise selling the pair on the reversals of the MACD indicator "down" as long as the pair is below the 1.1030 mark, corresponding to 0.0% Fibonacci.

On the older wave scale, the wave analysis of the ascending trend section has taken on an extended form but is probably complete. We have seen five waves, which are most likely an a-b-c-d-e structure. The formation of the downward trend section may still need to be completed, and it can take any form in terms of structure and length.