The wave pattern on the 4-hour chart for EUR/USD has undergone some changes. There is still no reason to consider the upward trend segment (lower chart), which began in January of last year, canceled. However, the trend structure has now taken on a corrective form. From a long-term perspective, the development of wave C can be expected, with its low likely to form below the low of wave A. At present, it is difficult to believe in such a significant decline of the euro, but the first quarter of 2026 demonstrated that geopolitical developments can dramatically alter market trends.

On the lower timeframe, I can identify a classic three-wave bullish corrective structure. Following the completion of this structure, a new downward trend segment began to develop, which logically should take the form of an impulsive wave sequence. If this assumption is correct, we should expect the formation of a five-wave structure within wave C of the higher degree, with targets below the 1.1400 level. Are there sufficient fundamental reasons to expect such a strong strengthening of the U.S. dollar? Not with complete certainty. However, the market is increasingly losing confidence in the prospect of a deal between the United States and Iran, which is supporting sellers.

EUR/USD gained 15 points on Thursday, but overall once again showed a very limited trading range. During the day, the market received no meaningful information from Christine Lagarde's speech, leading me to conclude that no important statements were made. In addition, for the first time in a long while, there were no geopolitical headlines from either Trump or Iran. As a result, we witnessed another uneventful trading day. The pair continues to form corrective wave 4, which has taken the shape of a sideways range.

However, attention should shift this morning to the Nonfarm Payrolls report and the U.S. unemployment rate. Just a few months ago, these reports were key drivers of Federal Reserve monetary policy. Now, however, inflation driven by the conflict involving Trump in the Middle East has moved to the forefront. Since we continue to hear about a potential agreement between the United States and Iran without seeing any concrete results, conditions in the oil, gas, and fuel markets could continue to deteriorate over time. This may trigger a new round of inflationary pressures. Consequently, the Federal Reserve is likely to focus more on inflation dynamics than on labor market conditions in the near term. Therefore, today's reports are not as important as they were several months ago.

Nevertheless, they cannot be considered secondary. The U.S. labor market recovered during 2026, although not completely. If the Federal Reserve begins raising interest rates, it could trigger another period of economic cooling. For this reason, the regulator is not rushing to tighten monetary policy, even though inflation has increased by 1.4 percentage points over the past two months. Such a move could weaken labor market conditions again and slow economic growth. However, the Federal Reserve may be forced to raise rates if inflation continues to accelerate. The U.S. inflation report for May will be released next Wednesday.

General Conclusions

Based on my EUR/USD analysis, I conclude that the pair remains within the broader upward trend segment (lower chart) and, in the shorter term, within a corrective structure. At present, wave 5 may be forming, potentially as part of wave C. The entire wave C structure (if the current wave count is correct) could ultimately complete far below the 1.1400 level. However, such a substantial decline would require significant geopolitical support. Otherwise, the bearish wave sequence could become truncated and complete only slightly below the 1.1600 level.

On the higher timeframe, an upward trend segment remains visible, followed by the formation of a corrective wave structure. In the near term, wave C is expected to develop with targets near 1.1352, corresponding to the 38.2% Fibonacci retracement level. Once the A-B-C structure is completed, a new long-term bullish trend may begin.

Key Principles of My Analysis:

1. Wave structures should be simple and easy to interpret. Complex structures are difficult to trade and often undergo revisions.
2. If there is no confidence in current market conditions, it is better to stay out of the market.
3. There is never complete certainty regarding market direction. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.