22.09.202610:00 Forex Analysis & Reviews: EUR/USD Analysis – September 22: A Neutral Start to the Week

The wave structure of the 4-hour chart for EUR/USD is becoming more complex. There is still no question of cancelling the upward trend segment (lower chart), which began in January of last year. On the contrary, we saw a complete corrective A-B-C structure, which may have been completed. However, the latest events related to the Fed and its policy have once again affected the current wave structure. Let me remind you that the news background and wave structure often conflict with each other, making adjustments necessary.

The wave structure may now once again transform into a more complex one. Wave C has taken a three-wave form, while the next wave is identified as wave D. The entire trend segment that began on January 27 may now take a five-wave corrective form, A-B-C-D-E. If this assumption is correct, wave D has been completed, and on August 21, EUR/USD entered the phase of forming wave E, the low of which should be below the low of wave C at 1.1325. Now only one question remains: will the news background support the dollar strongly enough for the pair to fall below 1.1325?

The market shifts its focus to geopolitics.

The EUR/USD pair remained virtually unchanged throughout Monday, while the range of movements during the day was again minimal—no more than 15 points. The first day of the week was rather uneventful, as there was no significant news background. The only noteworthy event I can mention is Donald Trump's statements that he intends to make an important decision regarding the conflict with Iran in the near future. Let me remind you that Tehran had previously sent Washington yet another list of demands for ending the conflict. The content of the list is no different from previous versions, so I have no doubt that it will be rejected. Donald Trump will then put forward his own list of ultimatums, which, naturally, will also be rejected. Consequently, the situation in the Middle East will not change.

However, some analysts believe that the U.S. president may make concessions in negotiations with Tehran, as fuel prices in the United States continue to rise, while the Congressional elections will take place in less than a month and a half. The Republican Party's chances of winning these elections are declining day by day. Therefore, the U.S. president essentially has two options: either try to buy voters' support or end the war with Iran. In my view, the second option will no longer ensure a Republican victory in both chambers of Congress. Americans are extremely dissatisfied with Trump's policies, which have already led to higher inflation, as well as higher fuel prices and various levies and unlawful tariffs. The national debt continues to rise, while investors' attitude toward the U.S. government is best reflected in the yields and attractiveness of Treasury securities.

General conclusions.

Based on the EUR/USD analysis, I conclude that the pair remains within the framework of a global corrective trend segment A-B-C-D-E. If this assumption is correct, the decline in quotes will continue, with targets below the low of wave C at 1.1325. I considered this scenario an alternative one, and if it had not been for the Fed meeting, it would have remained so—a reserve scenario. However, the Fed delivered a surprise, and the market was left with no other options but a new wave of purchases of the U.S. currency. At the same time, new reasons are needed for the dollar to strengthen further. I do not see any such reasons at present. Consequently, a new upward, non-corrective wave may begin from the current levels.

On the higher time frame, an upward trend segment can be seen, followed by the formation of a corrective A-B-C structure. This structure may take a five-wave form, but at present I consider it completed. If this is the case, the formation of a new impulsive upward trend segment has begun.

The main principles of my analysis:

1. Wave structures should be simple and easy to understand. Complex structures are difficult to trade and often involve changes.
2. If there is no confidence in what is happening in the market, it is better not to enter the market.
3. There can never be 100% certainty about the direction of a market move. Do not forget to use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.