FX.co ★ EUR/USD. Analysis for March 12th. A new surprise from US inflation

The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. Over the past year, we have observed only three large-scale, three-wave structures, constantly alternating with each other. Currently, the construction of another three-wave structure continues, which is a downtrend that began on July 18 of last year. The presumed wave 1 is completed, and wave 2 or b has become more complex three or four times but is now also complete.

The upward trend may still resume, but its internal structure will be absolutely unreadable in this case. I remind you that I try to highlight clear and unambiguous wave structures that do not tolerate dual interpretation. If the current wave analysis is correct, the market has moved on to form wave 3 or c. Currently, the presumed wave 2 in 3 or c is being built. If this is indeed the case, the construction of this wave may be completed in the near future, as it has already taken on a clearly defined three-wave form. In any case, this decline in pair quotes should not end here. Unfortunately, last week the formula worked: news background + the market's unwillingness to buy the dollar = a new rise in the EUR/USD pair.

The important level of 1.0956 saves the dollar from big problems.

The exchange rate of the EUR/USD pair dropped by 20 basis points on Tuesday, but its losses could be much greater by the end of the day. The reason is that half an hour ago, the US inflation report was released, which once again showed no signs of slowing down. I remind you (and in my articles, I regularly draw attention to this fact) that inflation in America has not decreased for 7 or 8 consecutive months. How can one expect the Federal Reserve to soften monetary policy even in June with such dynamics? Personally, I do not quite understand. How can the dollar keep falling constantly with such a trajectory of decreasing consumer prices? I also don't understand.

In recent weeks, I have regularly written that there is nothing terrible happening with the EUR/USD pair. The downward wave 3 or c has started its construction, but within it, there should be correction waves. It seems that we observed one of them in the last month. An unsuccessful attempt to break through the level of 1.0956 rejects quotes from the highs reached, and a new report on consumer prices allows us to expect activity from sellers in the coming weeks.

I will also note that the core inflation decreased from 3.9% year on year to 3.8%, but the market clearly expected more. Core inflation rose from 3.1% to 3.2% year on year, as traders expected. However, it does not matter what the market is expecting now. The important thing is that inflation in America is not decreasing, which means the Fed has no reason to move to a more accommodative policy.

General conclusions.

Based on the analysis of the EUR/USD, I conclude that 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 downward wave 3 or c with a significant decrease in the pair. Currently, an internal corrective wave is being built, which may have already been completed. I continue to consider only sales with targets around the calculated level of 1.0462, which corresponds to 127.2% according to Fibonacci.

On a larger wave scale, it can be seen that the presumed wave 2 or b, which was more than 61.8% according to Fibonacci from the first wave in length, may be completed. If this is indeed the case, then the scenario with the construction of wave 3 or c and a decrease in the pair below the 4-figure has begun to be implemented.

Key principles of my analysis:

1. Wave structures should be simple and clear. It is difficult to play with complex structures; they often bring changes.
2. If there is no certainty in what is happening on the market, it is better not to enter it.
3. There is never 100% certainty in the direction of movement. Don't forget about protective stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.