Fundamental analysis

EUR/USD analysis on October 27. ECB raises interest rate to 2%


The wave marking of the 4-hour chart for the euro/dollar instrument has finally suffered the changes that I have been waiting for for a long time. The demand for the European currency has been growing in recent days, and 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 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 the quote 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 demand for the euro currency is declining.

The euro/dollar instrument declined by 80 basis points on Thursday. Since the current wave markup already allows for the completion of the construction of an upward trend section, I can’t help but consider the option of lowering quotes. Today, Thursday, October 27, the ECB raised the expected interest rate by 75 basis points. Thus, the first of my three (and not only) predictions came true. Let me remind you that I expect all three central banks to raise their rates by 75 points. However, such a decision by the European regulator should have caused an increase in demand for the euro currency, but caused its decline. Why did this happen?

Many analysts and experts said even before the ECB meeting that the market could have taken into account a 75-point rate increase until today. This is seen by the movement of the instrument in recent days when demand for it has been growing for no apparent reason. Today, we most likely saw just such a scenario, when the market played an important event in advance, and then began to move in the opposite direction. The current wave marking of the instrument quite allows for a new powerful decline, since the entire wave structure from September 28 may receive a corrective form a-b-c. And in this case, it can already be completed. I also draw attention to the fact that only three waves are visible inside the supposed wave 3, which indicates its corrective status. In this case, there is even more chance that it is not wave 3, but C. Of course, this wave may not be fully equipped yet. If the price increase resumes tomorrow or on Monday, then this wave may take a five-wave form. But so far, the demand for the euro currency is falling.


General conclusions

Based on the analysis, I conclude that the construction of an upward trend section has begun after all. However, it may not last very long. 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.” However, by the end of this section of the trend, you also need to 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 kind of length, so I think it’s best now to isolate 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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