Wave pattern
The wave counting on the 4-hour chart for the Euro/Dollar instrument looks quite holistic at present. The trend plot a - b - c - d - e, which is formed since the beginning of the year, is interpreted as wave A, and the subsequent increase in the instrument is interpreted as wave B. If this assumption is correct, then the construction of the supposed wave C has begun and is continuing, which can take on a very extended form.
The corrective wave b took on a more complex form due to the sale of the US currency last Thursday, however, on Friday, the decline in quotes resumed, which may become the beginning of a new extended wave c in C. Thus, wave b is considered completed at the moment. The supposed wave c can take no less extended form than wave a. Its targets are located below the 15th figure to the 13th. However, in order for this wave to continue its construction, a successful attempt to break through the 1.1541 mark, which corresponds to 61.8% Fibonacci level, is required.
Markets are fully focused on the Fed meeting, but demand for the dollar is not growing.
The news background for the EUR/USD instrument remained weak on Tuesday. During the first two days, there was nothing particularly interesting in either the United States or the European Union. Yesterday, the indices of business activity in the US manufacturing sector for October were released, and today – the same index for the European Union. In all cases, the changes were minimal and did not affect either the market sentiment or the current wave counting.
If tomorrow's rhetoric of the Fed representatives turns out to be more "hawkish" than at the last meeting, and a decision is made on the tapering process, then this could be a catalyst to increase the demand for the US dollar.
Without this, a successful breakout of 1.1541 will not happen. And without this there will be no further construction of the supposed wave c and the entire wave counting can get even more complicated. However, we are only not expecting the Fed meeting and Jerome Powell's press conference tomorrow, the ECB President Christine Lagarde is also scheduled to deliver a speech.
Markets have been following the statements of central bank officials quite closely lately, as they understand that the time for tightening monetary policy is approaching, and inflation around the world is rising, which requires intervention from central banks. Therefore, each speech by the President of the Central Bank can be important both for the markets and for a particular currency. Thus, tomorrow we will have two important speeches at once, and let's hope that they will help the US dollar to continue its growth.
General conclusions
Based on the analysis, I conclude that the construction of the downward wave C will continue, and its internal corrective wave has completed its construction. Therefore, now I advise selling the instrument for each signal from the MACD "down" with targets located near the calculated levels of 1.1454 and 1.1314, which corresponds to 76.4% and 100.0% Fibonacci levels.
The wave counting of the higher scale looks quite convincing. The decline in quotes continues, and now the downward section of the trend, which originates on May 25, takes the form of a three-wave corrective structure A-B-C. Thus, the decline may continue for several more months until wave C is fully completed.
The material has been provided by InstaForex Company - www.instaforex.com