On the four-hour chart, the wave pattern of the EUR/USD pair has slightly become confusing lately, but the quotes' movement from the reached lows preserves the integrity of the current wave pattern. We have received a three-wave wave 4, and if the current wave pattern is correct, then the expected wave 5 of the upward trend section begins to form. And although the internal wave pattern of the proposed wave 3 remains very doubtful, 5 waves are still clearly visible inside this wave. Therefore, there is currently no reason to make adjustments to the current wave pattern. If the decline in quotes continues next week, then it will be possible to really talk about making adjustments, since in this case, wave 4 will take an even more complex form and will simply not fit into the wave picture of the entire upward section of the trend that started from March 31.
The news background of this instrument was quite strong last Friday. However, this news has already been played out by the market, and so, it's time to focus on the new week. The question of whether the news background or the wave pattern will win will be an intense issue in the next few days. It can be recalled that the current wave pattern does not imply a greater decline in quotes. Thus, any news in favor of the US dollar can disrupt the entire wave picture. Conversely, any news that supports the Euro will play in favor of the current wave pattern. However, there will be almost no news in the first three days of the current week. The first-quarter GDP report isn't out until Tuesday but the markets are already well aware of what to expect from it. Thus, any sharp reaction should not be expected.
We will have to wait for the important news until Thursday when the US will release an inflation report, and the EU n will summarize the results of the ECB's next meeting. We can say that the inflation report is more important for the markets. If the consumer price index continues to accelerate, as it has done in recent months, then there is no doubt that the demand for the US currency will decline, which necessary.
But in terms of the ECB, it is even difficult to say what to expect. The President of the ECB, Christine Lagarde, has repeatedly said that the EU economy is not ready for the PEPP program to be over. In any case, the terms of this program are planned until the end of March 2022. If the economy is recovering at the same pace as the US, then we could talk about early termination of funding. However, the data for the first quarter suggests that the EU economy collapsed by 1.8% y/y. Therefore, any "hawkish" notes in Christine Lagarde's speech cannot be expected.
Based on the analysis, the quotes of the instrument are still expected to rise, although the current wave pattern is quite uncertain. In any case, it is still recommended to buy the instrument with targets located around the levels of 1.2300 and 1.2340, for each MACD upward signal, but now, a new decline in quotes may lead to the need to make adjustments to the current wave pattern.
The wave pattern of the upward trend section is still quite complete. The section of the trend, which started to form immediately after it, took on a corrective and also fully completed form. If the current wave pattern is correct, then the construction of a new section of the upward trend continues and its first two waves have completed.
The material has been provided by InstaForex Company - www.instaforex.com