Fundamental analysis

EUR/USD analysis on November 1. The euro continues to wait for the Fed meeting.


The wave marking of the 4-hour chart for the euro/dollar instrument has undergone certain changes. The demand for European currency has been growing in recent weeks. Quotes have been rising, leading to the fact that they have gone beyond the peak of the last rising wave. Thus, now we have at least a three-wave ascending structure, which can become a new upward section of the trend for five or more waves or remain a three-wave corrective. In the first case, the European currency has a good chance of growth over the next few months. In the second case, the quote decline may resume at any moment. The most important thing is that now the wave markings of the pound and the euro coincide. If you remember, I have repeatedly warned about the low probability of a scenario in which the euro and the pound will trade in different directions. Theoretically, this is certainly possible, but it happens extremely rarely in practice. Both instruments assume the construction of at least one more upward wave, and the low of September 28 can be considered a new starting point. The downward section of the trend has become so complicated that even its internal waves are very difficult to identify correctly. But now we have a clear starting point.

Will the dollar be able to regain the confidence of traders after the rate hike?

The euro/dollar instrument rose by 60 basis points on Tuesday, but demand has been growing for the US currency in the last few days. Unfortunately, the latest movements do not answer the question of which wave we are dealing with. The current decline in quotes may be a corrective wave as part of impulse 3 of the upward trend section, or it may be the beginning of the first downward wave as part of a new downward trend section (or a continuation of the old one, which has already been complicated many times). Thus, in some way, the Fed meeting can greatly affect the mood of the market, which after will decide what to do next with the instrument. In the meantime, we can only wait for Wednesday.

Although there is nothing much to wait for because now the majority of analysts are talking about raising the rate by 75 basis points, only up to 10% of respondents believe that the rate will increase by only 50 points. In my opinion, the rate will rise by 75 points since inflation in America is still slowing down too slowly for the Fed to slow down. Any tightening of monetary policy for the US currency is good, but at this time, there is still a possibility of completing the entire downward trend section. If this is true, another Fed rate hike will not change the mood of traders to the opposite. The dollar may rise locally but will continue to fall more globally. The internal wave structure of the assumed wave three does not look like an impulse one, so I think this is a corrective section of the trend. However, it can take the five-wave form a-b-c-d-e.


General conclusions.

Based on the analysis, I conclude that the construction of an upward trend section has begun, but it may not last very long. At this time, the instrument can build the third wave, so I advise buying with targets near the estimated mark of 1.0361, which equates to 261.8% by Fibonacci, according to the MACD reversals “up.” However, by the end of this trend section, you must be ready now.

At the higher wave scale, the wave marking of the descending trend segment becomes noticeably more complicated and lengthens. It can take on almost any length, so it’s best to isolate the three and five-wave standard structures from the overall picture and work on them. One of these five waves can be just completed, and a new one has begun its construction.

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