The European currency is once again experiencing a gradual decline and risks transforming its wave structure, which had just begun to take a convincing form. We saw a clear five-wave impulse structure, after which it is logical to expect three corrective waves. Instead of three waves, we observed five, indicating that the correction will be more complex and prolonged. However, this requires a decrease in demand for the US dollar and an increase in demand for the euro. How can this be ensured if geopolitics continues to weigh on the EUR/USD?
Next week, hopes for an end to the conflict in the Middle East are low. Although Donald Trump has been stating for a week that productive negotiations with Iran are underway, Iran itself denies any negotiations, while American troops are increasing their presence in the region. It seems that all signs point to further escalation of the conflict rather than the contrary. Therefore, regardless of the wave pattern, it is important to remember that the probability of strengthening the American currency remains higher.
Several reports will be released in the Eurozone next week, but most are secondary. For example, Germany will see retail sales, inflation, unemployment rates, and changes in the number of unemployed. But what significance do these data hold right now? There is a reasonable chance the market will pay attention to the Eurozone inflation report, as it will serve as the basis for the ECB's monetary policy decisions. Overall, market participants have already been forewarned about a possible rate hike in April, as the ECB is confident of rising consumer prices. However, the question is how much inflation will increase in the first month of the new oil and gas architecture.
Based on the analysis of EUR/USD, I conclude that the instrument remains within the rising section of the trend (bottom image) and, in the short term, has completed the formation of a downward wave set. Since the five-wave impulse structure is complete, in the coming week or two, my readers can expect an increase in quotes with targets around 1.1666 and 1.1745, corresponding to the 38.2% and 50.0% Fibonacci. Further movements of the instrument will completely depend on events in the Middle East.
The wave structure of the GBP/USD instrument has become quite complex and difficult to read. We now see a seven-wave downward structure on the charts, which does not clearly represent a pattern. Most likely, there is an extension or complication within one of the waves. However, this does not make the wave pattern any clearer. If the wave pattern has once become complicated to the point of unreadability, it may become even more complicated multiple times. Therefore, I believe we should focus on the wave analysis of the EUR/USD instrument, which looks much clearer. It should also not be forgotten that geopolitical factors can send both instruments into a new decline at any moment. If this does not occur, the euro and the pound could see increases within the context of corrections.
Key Principles of My Analysis:Wave structures should be simple and understandable. Complex structures are difficult to trade and often require adjustments.If there is market uncertainty, it is better not to enter.There is no 100% certainty about the direction of market movements, and there never can be. Don't forget about protective Stop Loss orders.Wave analysis can be combined with other types of analysis and trading strategies.