FX.co ★ EUR/USD. Analysis for December 14th. The ECB meeting – and a new drop in the dollar

The wave analysis of the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have seen only three wave structures that constantly alternate with each other. At present, the construction of another three-wave downward structure continues. The presumed waves 1 and 2 are possibly completed, suggesting that the pair has moved on to building the third wave, which should lead to a decrease in the pair to the area of the 4th figure and below. There is a risk of complicating the presumed wave 2 or b, as the market is currently unstable, and the news background can be interpreted in favor of any currency. However, I expect a resumption of the decline in the euro quotes.

Regardless of the outcome of wave 2 or b (which may take an even more extended form), the overall decline in the European currency will not be completed, as the construction of the third wave of the downward trend segment is still required in any case. The only option is the complication of the entire wave structure of the last months to an unrecognizable state.

Christine Lagarde has not even spoken yet, and the euro has already soared to the skies. The euro/dollar pair rose by 80 basis points on Wednesday and added another 60 today. And the day is not over yet. Everyone remembers that yesterday evening the FOMC summed up the results of the last meeting of the year, and today the results of the Bank of England and the ECB were summed up. Therefore, the sharp increase in demand for the European currency can be related to nothing else but these events. Yesterday evening, Jerome Powell talked about a rate cut next year and hinted that the rate was unlikely to rise. These two statements were enough to sharply reduce demand for the US currency. Everything is logical.

Today, the ECB took a neutral position, stating that rates would remain at their peak value for as long as needed to ensure 2% inflation and inflation itself could accelerate in the coming months. These statements cannot be considered "hawkish," and the euro would hardly have continued to rise if the Governor of the Bank of England had not stated that the rate had not yet reached its peak. Well, the Briton, as is often the case, pulled the European up.

For the dollar, yesterday and today everything turned out not in its favor. It is precisely because of this that we observe a strong increase in the pair for the second day in a row. A little more, and the peak of the presumed wave b will be updated, and in this case, the entire wave 2 or b will take an even more extended form. However, this is a case where the news background overrides the wave analysis. I am not giving up expectations of a sharp decline in the pair yet, but now new signs of a downturn are needed. The current rise in quotes may well be a correctional wave as part of 3 or c.

General Conclusions:

Based on the conducted analysis, I conclude that the construction of a bearish wave set continues. Targets around the level of 1.0463 have been perfectly worked out, and the unsuccessful attempt to break through this level indicated a transition to the construction of a corrective wave. Wave 2 or b has taken a completed form, so I expect the construction of an impulsive downward wave 3 or c with a significant decrease in the pair soon. I still recommend selling with targets located below the low of wave 1 or a. At this time, wave 2 or b can be considered complete.

On a larger wave scale, it can be seen that the construction of a corrective wave 2 or b continues, which in length is already more than 61.8% according to Fibonacci from the first wave. As I mentioned earlier, this is not critical; the scenario with the construction of wave 3 or c and a decrease in the pair below the 4th figure remains valid.