Relevance up to 09:00 2022-07-29 UTC–4
The wave marking of the 4-hour chart for the euro/dollar instrument became more complicated a few weeks ago, but at the moment, it does not require new adjustments. A successful attempt was made to break through the 261.8% Fibonacci level, which was also the low of the waves E and b, so these waves are hardly E and b anymore. I have built a new wave markup, which does not yet consider the rising wave marked with a bold red line. I have already said that the entire wave structure can be complicated an unlimited number of times. It is the disadvantage of wave analysis since any structure can always take a more complex and extended form. Therefore, now I propose to work on simpler wave structures that contain waves of a lower scale.
As you can see, the construction of a descending wave has presumably begun, which may be wave 5 of a new downward trend section. If this assumption is correct, the instrument has resumed its decline with targets below 1.0000. So far, I don’t see any reason to expect any other instrument movements.
The results of the Fed meeting were encouraging, but the market was upset.
The euro/dollar instrument increased by 90 basis points on Wednesday and decreased by 50 on Thursday. The decline on Thursday should have been greater, but just half an hour ago, a report on GDP in the United States was released, which confused the market for the second time in two days. However, we will talk about this report a little later. For now, I would like to focus readers’ attention entirely on the Fed meeting. The interest rate immediately increased by 75 basis points, as most analysts and traders expected. However, the demand for the dollar, contrary to this decision of the Fed, did not increase; on the contrary, it began to decline. From my point of view, the market did not understand exactly how to interpret the results of the FOMC meeting. On the one hand, the rate has increased by 75 basis points again, and on the other hand, the more it grows, the higher the probability of a recession.
However, whether the market understood or did not understand how to interpret the results of the meeting, I am not too interested. I’m interested in how the instrument moved yesterday. And despite the increase by 100 points, it remained within the framework of the construction of the descending wave 5. The wave pattern is not broken and suggests a further decline of the instrument. And the results of the Fed meeting, whatever the reaction to them on Wednesday evening, show and prove only one thing – the demand for the dollar may increase further in the next few weeks. I do not even know if it is worth saying once again that the interest rate growth is a very strong factor in supporting the US currency. What do we have in the end? The wave pattern suggests a further decline of at least 300 points. The news background, although ambiguously perceived by the market, also suggests a continuation of the decline of the European currency. From my point of view, everything is unambiguous, simple, and clear. I admit that alternative options are also possible, but now they all have no more than a 10% probability of execution.
Based on the analysis, I conclude that the construction of the downward trend section continues. If so, it is now possible to sell the instrument with targets located near the estimated 0.9397 mark, which is equal to 423.6% Fibonacci, for each MACD signal “down” in the calculation of the construction of wave 5. Wave 4 can already be completed.
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 I think it’s best to isolate the three and five-wave standard wave structures and work on them.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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