FX.co ★ Analysis of EUR/USD. January 29th. The first day of the week passed without incidents

The wave analysis of the 4-hour chart for the euro/dollar pair remains unchanged. Over the past year, we have seen only three-wave structures that constantly alternate with each other. The construction of another three-wave structure - a downtrend - continues. The assumed wave 1 is completed, but wave 2 or b has complicated three or four times, and there is no guarantee that it will not be complicated again.

Although the news background cannot be considered "supporting the European currency," the market regularly finds reasons to increase demand for the euro. This situation does not reflect the real picture in the currency market. The upward segment of the trend may resume, but its internal structure will become unreadable.

The internal wave analysis of the presumed wave 2 or b has changed. Since the last downtrend wave was disproportionately large, I now interpret it as wave b. If this is the case, wave 3 or c is currently being formed, and wave 2 or b is completed. The current pullback from the highs looks convincing.

The market sells the euro in small portions.

The euro/dollar pair decreased by 25 basis points on Monday. The amplitude was quite low, so the market did not rush events on Monday when a series of important reports and events awaited it. Demand for the European currency is gradually decreasing, which fully corresponds to the current wave pattern. I still expect a decline in the euro.

There is nothing particularly noteworthy among the events on Monday. In Europe, speeches were made by Luis de Guindos, Mario Centeno, and Peter Kazimir. The opinions of all three politicians differed significantly from each other. Centeno stated that it is better to lower the rate sooner rather than later. Kazimir said it is best to start easing in June but not earlier. Luis de Guindos did not support the first or the second and, in general, refused to talk about specific timing.

The statements of these officials only confirmed my opinion that ECB policymakers need to know when the first easing will occur. Everything, as before, will depend on inflation and core inflation indicators. ECB policymakers are confident that further tightening will not be required, but the market has been more certain of this for much longer than the ECB itself.

Based on the above, the European currency slightly declined on Monday, but it could have fallen without the speeches of Kazimir, Centeno, and de Guindos. The drop in the pair is so small that it can be completely disregarded. It is important that, in general, the European currency continues to decline, as I expect.

General conclusions:

Based on the analysis conducted, the construction of a bearish wave set continues. Wave 2 or b has taken on a completed form, so in the near future, I expect the continuation of the construction of an impulsive downtrend wave 3 or c with a significant decline in the pair. An unsuccessful attempt to break the level of 1.1125, corresponding to 23.6% according to Fibonacci, indicated the market's readiness for sales a month ago. I am considering only sales with targets around the calculated level of 1.0462, corresponding to 127.2% according to Fibonacci.

According to Fibonacci, the assumed wave 2 or b, which is already more than 61.8% in length from the first wave, may be completed on a larger wave scale. If this is the case, the scenario with the construction of wave 3 or c and a decline in the pair below the 4-figure mark has begun to unfold.