The Elliott wave count on the four-hour chart for EUR/USD has become more complex. On the higher time frame (lower chart), the downward trend segment has taken the form of a five-wave A-B-C-D-E structure, which could be complete at any moment, as it appears well developed. All the waves in this segment are approximately equal in size, which is why this structure is considered corrective. If this assumption is correct, the completion of this structure will be followed by the formation of an impulsive upward trend segment, with targets well above the 1.2000 level.
On the lower time frame (upper chart), an impulsive wave sequence is still forming, potentially belonging to wave E of the higher time frame. If this is indeed the case, the US dollar's advance is nearing its end, regardless of how much further it strengthens. The presumed wave 5 of E is either complete or close to completion. In either case, the current wave structure suggests that the downward wave sequence is nearing completion on both charts. News developments and a sharp shift in market sentiment have driven the US currency significantly higher, but the number of new reasons for further dollar appreciation is gradually diminishing.
Unrest in France Halts Buyers
The EUR/USD exchange rate fell by 15 basis points on Monday, although market conditions could still change before the end of the day. At present, the base-case scenario remains the formation of a new upward trend segment. However, it cannot be ruled out that news developments could once again invalidate the wave count. Unfortunately, situations in which news conflicts with the wave structure cannot be avoided. Ultimately, one of these opposing forces will prevail.
The day began with a decline in the euro as the market reacted to escalating unrest in France, which has increasingly been accompanied by widespread vandalism along protesters' routes, mass looting, and theft. The losses incurred by the government, which had planned to raise taxes and cut public spending in next year's budget, are estimated at hundreds of millions of euros. The planned savings now appear increasingly unlikely to materialize. In any case, the euro came under renewed pressure, although the decline was relatively limited. Unrest in France is undoubtedly negative, but similar unrest has repeatedly occurred in the United States in recent years, also driven by dissatisfaction with government actions. Therefore, this is not considered a major factor behind the euro's decline, particularly as the single currency has already been under market pressure for a month.
There were no significant economic releases today. During the current week, the UK is the only country expected to see genuinely important economic news and events. Overall, the market may begin pricing in monetary policy tightening by the Bank of England, which could allow the pound to outperform the euro this week. As for the euro, its prospects currently depend on the wave structure. If the market recognizes that the ECB could raise interest rates three times this year, the euro's recovery could proceed more smoothly.
Based on the EUR/USD analysis, the pair remains within a global corrective trend structure labeled A-B-C-D-E. However, this structure appears complete and could therefore be nearing its end. The current conditions appear favorable not only for buying the euro but also for anticipating the development of a sustained upward trend segment. According to the higher time frame, the pair is expected to rise to at least the 1.1700–1.1800 range. The failed attempt to break above 1.1126, corresponding to the 50.0% Fibonacci retracement level (lower chart, higher time frame), also suggests that the market may be preparing for a recovery.
The higher time frame shows a downward trend segment in the form of an A-B-C-D-E structure. The internal wave structure of wave E has taken an impulsive five-wave form but may already be complete. If this assumption is correct, a new upward trend segment will begin to develop.
The Main Principles of the Analysis:
Wave structures should be simple and clear. Complex structures are difficult to trade and often undergo changes.If there is insufficient confidence in the current market situation, it is better to stay out of the market.There can never be absolute certainty about the direction of price movement. Do not forget to use protective Stop Loss orders.Elliott wave analysis can be combined with other forms of analysis and trading strategies.