Forex Analysis & Reviews: 14.05.2024 - Analysis of EUR/USD pair on...

14.05.2024 05:23 PM

Analysis of EUR/USD pair on May 14th. Inflation in the US could accelerate even further

The wave analysis of the 4-hour chart for the EUR/USD pair remains unchanged. We are currently observing the construction of the presumed wave 3 in 3 or from the downtrend. If this is the case, the decline in quotes will continue for quite some time, as the first wave of this section completed its construction around the 1.0450 mark. Therefore, the third wave of this trend section should end lower.

The 1.0450 mark is only the target for the third wave. If the current downtrend segment becomes impulsive, we can expect five waves, and the euro may fall below the 1.0000 mark. Certainly, it isn't easy to expect such a development of events now, but there have been enough surprises in the currency market in recent years. Anything is possible.

Is there a probability of a change in wave analysis? There is always one. However, if, since October 3 of last year, we have observed a new uptrend segment, then the previous downtrend wave does not fit into any structure. Therefore, an uptrend segment is possible only with a significant complication of the wave analysis. Such a scenario seems unlikely to me at the moment, so I will proceed with the basic analysis.

The prospects for the dollar remain favorable, but the market thinks differently.

The EUR/USD pair rate increased by another 15 basis points on Tuesday. Today, the activity of market participants was slightly higher than yesterday, but this "slightly" is 10 points. Nothing has fundamentally changed. Throughout today until the moment of writing this review, the pair have hardly moved. The market was not interested in inflation reports in Germany or the ZEW Institute indices. Moreover, they did not interest me, and I tried to pay attention to all reports.

The market began trading only when the Producer Price Index in the US was released. Why is this index so important? This is just one component that makes up the overall and core inflation. It is easy to assume that rising producer prices lead to rising prices in stores. Therefore, if prices rise faster than the market expects, overall inflation will also accelerate. Today, the Producer Price Index showed +0.5% every month in April, and tomorrow, the core and basic inflation will be released, which no one now expects to slow down by more than 0.1-0.2%. In the current circumstances, even a decrease of 0.1-0.2% can be a very good result, but it will not be enough to renew expectations of easing the monetary policy of the Fed soon. Therefore, I still expect the strengthening of the US dollar.

General conclusions

Based on the analysis of the EUR/USD, the construction of a downtrend set of waves continues. Waves 2 or b and 2 in 3 or c are completed, so I expect the resumption of the construction of an impulsive downward wave 3 in 3 or c with a significant decrease in the pair. I continue to consider sales with targets around the calculated mark of 1.0462. An unsuccessful attempt to break through the 1.0787 mark, equivalent to 76.4% according to Fibonacci, indicates the market's readiness for new sales, but the second attempt to break through may be successful.

On a larger wave scale, the presumed wave 2 or b, which in length exceeded 61.8% according to Fibonacci from the first wave, 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.

The main principles of my analysis:

Wave structures should be simple and understandable. Complex structures are difficult to play; they often bring changes.
If there is confidence in what is happening in the market, it is better to avoid entering it.
There is never 100% certainty in the direction of movement. Remember to stop loss orders.
Wave analysis can be combined with other types of analysis and trading strategies.

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*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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Wave analysis

Chin Zhao,
Experto analítico de InstaForex
© 2007-2025

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