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The wave pattern on the 4-hour chart for EUR/USD has remained unchanged for several months, which is very encouraging. Even when corrective waves are forming, the structure's integrity is maintained. This makes accurate forecasting possible. It should be noted that wave patterns do not always look exactly like textbook examples. At the moment, however, the pattern looks very good.
The construction of the upward trend segment continues, and the news background mostly supports currencies other than the dollar. The trade war launched by Donald Trump continues. The confrontation with the Federal Reserve continues. Dovish expectations are growing. Trump's "One Big Law" will increase U.S. national debt by 3 trillion dollars, while the president keeps raising tariffs and introducing new ones. The market rates the results of Trump's first six months in office very poorly, even though U.S. GDP growth in Q2 reached 3%.
At present, it can be assumed that wave 4 is complete. If so, then the construction of impulse wave 5 has begun, with targets that could extend as far as the 1.25 level
. Of course, the corrective structure of wave 4 may take on a more extended five-wave form, but I am working from the most probable scenario.
The EUR/USD exchange rate declined by several dozen basis points on Friday, and it is difficult to assess this move. On the one hand, it is too weak to raise alarm and speak of canceling the upward trend scenario. On the other hand, buyers are clearly unwilling to move into active action, even though the news background is as favorable as it could be.
Just this week, Donald Trump raised tariffs on India, launched another round of confrontation with the Fed, and on Friday it became known that inflation in Germany accelerated to 2.2% in August, higher than market expectations. The increase may seem minor, but every significant trend begins with a small change. If inflation in Europe starts accelerating again, that is bad news for the ECB, which has already lowered interest rates to neutral levels. If inflation continues to rise, what can the European regulator do? Raise rates again? Such an option seems unlikely. If this assumption is correct, the ECB will not tighten monetary policy again, and inflation will have room to continue rising. Certainly, we need to see the inflation figures for the Eurozone as a whole for August before drawing strong conclusions. Still, Friday's data suggests that demand for the euro could have continued rising after Thursday. Yet, this did not happen, because market participants remain largely inactive, as they have been all week.
Based on my EUR/USD analysis, I conclude that the instrument continues to build an upward trend segment. The wave pattern remains entirely dependent on the news background tied to Trump's decisions and U.S. foreign policy. Targets for this trend segment can stretch as far as the 1.25 level. Accordingly, I continue to consider buying positions with targets around 1.1875, which corresponds to 161.8% Fibonacci, and higher. I assume that wave 4 is complete. Therefore, it is still a good time to buy.
Basic principles of my analysis:
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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