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11.10.202317:04 Forex Analysis & Reviews: Analysis of EUR/USD. October 11th. Inflation in the European Union continues to decline, but there are concerns

Exchange Rates 11.10.2023 analysis

The wave analysis on the 4-hour chart for the euro/dollar pair remains quite clear. Over the past year, we have only seen three-wave structures that constantly alternate with each other. Over the past few months, I have consistently mentioned that I expect the pair to approach the 1.5 figure, where the construction of the last upward three-wave structure began. This target was reached after a two-month decline. The presumed first wave of the new downtrend can continue its construction, although there are currently signs of its completion.

None of the recent price increases resembled a complete wave 2 or b. Therefore, all of these were internal corrective waves in wave 1 or a. If this is indeed the case, the decline in quotes may continue for some time during this wave. And thus, the overall decline of the European currency will not be completed because the construction of the third wave is required. Within the first wave, there are already five internal waves visible, so its completion is approaching. An unsuccessful attempt to break above the 1.0463 level, which is equivalent to 127.2% according to Fibonacci, indicates the market's readiness to start building a corrective wave.

The euro currency found support around the 1.0463 level.

The euro/dollar exchange rate on Wednesday continued to move away from previously reached lows. The increase was only 10 basis points, which is very small, but the increase has been ongoing for the sixth consecutive day. Unfortunately, the overall increase in the European currency during this time amounted to only 170 points, which still makes me cautious about the conclusion regarding the construction of wave 2 or b. There are reasons to believe that this wave may also be internal in wave 1 or a and, accordingly, not 2 or b. However, "Rome was not built in a day," so it is quite possible that we are dealing with the slow construction of a corrective wave.

Today, it became known that inflation in Germany in September fell to 4.5% on an annual basis. This is the second estimate of the indicator, and it does not differ from the first. The decrease in inflation in Germany, as well as in the entire European Union, is a positive moment for the euro, but it does not increase the likelihood of further tightening of the ECB's monetary policy. Therefore, the increase in demand for the euro in response to such reports is expected to be weak. Based on all of the above, the increase in European currency quotes continues based on wave analysis rather than news background. Today, we are waiting for the FOMC minutes, but one should not expect too much from them. It is simply a document that contains information about the content of the regulator's meeting.

Exchange Rates 11.10.2023 analysis

General Conclusions:

Based on the analysis conducted, I conclude that the construction of a downward wave set is continuing. Targets around the 1.0463 mark have been ideally worked out, and an unsuccessful attempt to break this mark indicates the market's readiness to build a corrective wave. In my recent reviews, I warned that it is worth considering closing short positions because there is a high probability of building an upward wave at the moment. An unsuccessful attempt to break above the 1.0637 level, which corresponds to 100.0% according to Fibonacci, will indicate the market's readiness to resume the decline. In this case, I recommend new sales of the pair with a target of 1.0463.

On a larger wave scale, the wave analysis of the upward trend has taken on an extended form, but it is likely completed. We have seen five upward waves, which are most likely a structure of a-b-c-d-e. Subsequently, the pair has built four three-wave structures: two downward and two upward. Now, it has probably entered the stage of constructing another more extended downward three-wave structure.

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