The wave analysis on the 4-hour chart for the EUR/USD instrument is becoming complicated. There is still no talk of canceling the upward segment of the trend (lower picture), which began in January of last year. On the contrary, we have seen a complete corrective structure A-B-C, which is likely completed. We did not receive a convincing wave 5 in C. This wave has taken on a truncated form, which occurs from time to time. It should be noted that classic wave structures are typically found only in textbooks. In real life, traders and analysts must be more flexible in their analysis. Therefore, I have been saying in my reviews for a month now that we should prepare for the euro's growth. If the current wave analysis is correct, the instrument is at the very beginning of a new upward trend segment.
On a smaller scale, I can identify a classic five-wave downward structure with a truncated wave 5. I had expected the euro to dip to the 13-figure level, but the news backdrop turned against the dollar, and the sellers lacked enough strength to build a convincing wave 5. Therefore, it can be considered that a new upward wave sequence began to form on July 28.
Today the Fate of the Dollar Will Be Decided
The EUR/USD rate hardly changed on Thursday, and the last 5-6 trading days can be forgotten from memory and charts. There have been no interesting movements in the market over the past week. Over the last six days, the euro has sluggishly decreased, covering a distance of only 25 basis points (if we judge by the opening and closing of the days). The amplitude of movements each day did not exceed 15-20 points. We can only hope that market participants will awaken from their slumber today.
There are plenty of topics for discussion this Friday morning. It is certainly worth reminding my readers again that today will feature the infamous speech by Federal Reserve Chair Kevin Warsh, and the annual Non-Farm Payroll report will also be released. However, it's unlikely that any traders have forgotten about these events. We will discuss these two events in a separate review, as the subject is quite broad. Here, I want to point out that U.S. President Donald Trump yesterday rejected any possible return to the Memorandum of Understanding establishing relations with Iran and a return to the negotiating table. According to Trump, he is not seeking an opportunity to meet with Tehran's representatives; it is Tehran that wants the meeting and is begging for a deal. We've heard such phrasing a million times before; Tehran has rejected and disproved it just as many times.
Trump has definitively placed his bet on the economic blockade of Iran, which remains uncertain in terms of when it will begin and what form it will take. I remind you that Trump's latest "genius plan" is for many countries that have relations with Iran to abandon them and join the economic blockade. It's hard for me to understand why Turkey or China would want that. It is unlikely that Ankara or Beijing plans to heed the White House's directives and comply unconditionally. Therefore, at this moment, Trump's plan to suppress Iran appears to be a farce.
General Conclusions
Based on the analysis of the EUR/USD pair, I conclude that the instrument remains within an upward segment of the trend (as shown in the lower panel) and, in the short term, has transitioned to a new upward wave sequence. In my view, this is an excellent time to establish long positions. If the downward segment of the trend, which began on January 28, does not take on a more extended, five-wave form (which requires a strong news background in favor of the dollar), the EUR/USD instrument is at the very beginning of a new, prolonged upward segment of the trend, with targets scattered up to the 25th figure.
On a higher scale, an upward trend segment is visible, after which a corrective wave sequence began. The structure A-B-C is presumed to be complete. If this is the case, then the formation of a new impulsive upward trend segment has begun.
Key Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to trade and often lead to changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There can never be 100% certainty in the direction of movement. Always remember to set protective stop-loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
