Wave pattern
The wave counting on the 4-hour chart for the Euro/Dollar instrument looks quite holistic now. The plot a-b-c-d-e, which has 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 proposed wave C, which can take a very extended form, is now underway.
The corrective wave b took a more complex form due to the sales of the US currency last Thursday, but on Friday the decline in quotes resumed, which could be the beginning of a new extended wave c to C. Thus, wave b is currently considered completed. The proposed wave c can take no less extended form than wave a. Its targets are located below the 15th figure, up to the 13th. However, in order for this wave to continue its construction, a successful attempt to break through the 1.1541 mark is required, which corresponds to 61.8% Fibonacci level.
Nonfarm Payrolls exceeded market expectations.
The news background for the EUR/USD instrument remained very strong throughout Friday. The U.S. economic reports helped the dollar strengthen by another 50 basis points. It seems that the markets were confident in the strong Nonfarm Payrolls report, because the demand for the dollar began to grow in the morning, and when the report itself came out, it stopped doing so. Also, other reports from the U.S. also turned out to be better than market expectations. Therefore, there could not be such an option in which a weaker report would overshadow the Nonfarm Payrolls. By the end of October, the number of new jobs increased by 531,000, and unemployment fell to 4.6%. Thus, the labor market continues to "recover," and this is very good news for the U.S. economy.
This Wednesday, the Fed decided to start tapering the quantitative easing program, but the markets were not sure that this was the right decision. And the Fed itself, represented by Jerome Powell, said that if necessary, the QE program could be increased again. However, the Nonfarm Payrolls report relieved the tension, and at the same time supported the construction of the expected wave c in C. I also note that wages in America increased in October by 0.4% MoM and by 4.9% YoY. However, this growth is quite commensurate with the inflation rates that are currently observed in the United States. Wages are growing at an even slower rate than inflation. Thus, in reality, it is decreasing, not growing.
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 you to sell the instrument for each "downward" signal from the MACD, with targets located near the calculated marks 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