Fundamental analysis

EUR/USD analysis on October 26. The last two days raise even more questions, but the wave marking has been transformed.


The wave marking of the 4-hour chart for the euro/dollar instrument has finally suffered the changes that I have been waiting for a long time. The demand for European currency has been growing in recent days. Quotes have been rising and this has led 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 it can 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 decline in quotes 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 in practice, it happens extremely rarely. Now 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.

The euro is growing, but is everything so good?

The euro/dollar instrument rose by 90 basis points on Tuesday, and today – by another 60. However, neither yesterday nor today there is no news background to which such a market reaction could be attributed. The market could not react to anything at all, because there was nothing either on Tuesday or Wednesday. Then why is the demand for the euro currency growing? There may be several explanations here.

The first is wave marking. Since sooner or later we should have seen a normal correction structure, now an increase is possible for this reason. Second, demand did not begin to grow for the euro, it began to decline for the dollar. Third, the market expects a 75 basis point rate hike from the ECB meeting, and this is a good help for it to buy, not sell. However, in my opinion, even the current wave pattern does not allow us to conclude that the demand for the instrument will only grow now. The market may buy euros ahead of the ECB’s “hawkish” decision, but what will happen in a week when the Fed also raises the interest rate by 75 points? The market may reduce the demand for the dollar to lock in profits on previously opened positions, but if there are no reasons for the long-term growth of the euro, then the market will not close all positions on the dollar. And this may lead to the resumption of the downward trend section. The conclusion I can voice is as follows: since now we still have an upward section of the trend, it follows it. However, we remember that the entire increase in the euro currency can be limited to three waves. And now the third one is being built.


General conclusions.

Based on the analysis, I conclude that the construction of an upward trend section has begun after all. At this time, the instrument can build a new impulse wave, so I advise buying with targets located above the estimated mark of 1.0361, which equates to 261.8% by Fibonacci, by MACD reversals “up.”

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 kind of length, so I think it’s best now 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.

The material has been provided by InstaForex Company –

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