FX.co ★ Der | EUR/USD

The wave structure for EUR/USD is growing increasingly complex, yet the overarching bullish macro trend that originated in January of last year remains structurally intact. On the higher timeframes, the corrective wave sequence appears to be in its advanced stages, with long-term expectations pointing to the completion of corrective wave C, whose low has already extended below the trough of wave A. While wave C technically possesses the required depth to terminate at current levels, a dollar-favorable fundamental backdrop could easily stretch it into a far more prolonged structural impulse. Zooming into lower timeframes, the immediate price action reveals a textbook five-wave downward degree where wave 3 has already subdivided into five distinct sub-waves, and wave 4 appears to be completing its corrective consolidation. Once this entire five-wave structure finishes, EUR/USD should initiate a fresh, long-term upward impulse; however, because downward wave 5 of C has not yet begun its terminal leg, the euro remains vulnerable to further downside probing toward the 1.1300 handle or lower, with the 38.2% Fibonacci retracement level at 1.1352 acting as a major downside objective. This technical framework was further tested during Wednesday's trading session, where EUR/USD exhibited remarkable paralysis following the release of the U.S. inflation report. Despite high anticipation, the pair traded within a razor-thin 15-point range in the hour following the release, underscoring a complete lack of directional conviction among institutional market participants. Fundamentally, the U.S. dollar dodged a significant selloff; U.S. inflation matched consensus expectations by decelerating for a second consecutive month, an outcome that effectively crushed the probability of a Federal Reserve rate hike in September down toward zero. In a typical market environment, such dovish economic data would trigger a sharp selloff in the greenback and drive EUR/USD higher. Instead, the pair failed to even test the August 7 high positioned just 30 pips away, leaving wave 4 of C intact and preserving the technical setup for a final leg lower in wave 5 of C.

From a purely economic perspective, near-term U.S. dollar appreciation appears unjustified given that recent U.S. macroeconomic releases have consistently disappointed, offering minimal fundamental support for a sustained dollar rally. The primary wild card capable of bolstering greenback demand remains global geopolitics. Escalating Middle Eastern tensions—such as potential U.S. military strikes against Iran or Houthi blockades targeting the strategic Bab el-Mandeb Strait—could reignite risk-off safe-haven flows into the U.S. dollar, forcing EUR/USD down toward its lower wave targets. Without such a geopolitical catalyst, a sustained U.S. dollar rally remains fundamentally difficult to envision, making an eventual bullish re-adjustment of the Elliott Wave count more likely over time. In conclusion, while the pair remains locked in a short-term bearish cycle pointing toward the 1.1300 to 1.1352 target zone, the long-term bullish trend implies that current lower levels present a strategic opportunity to begin transitioning focus toward long setups once the A-B-C corrective pattern reaches full completion. Trading this complex structure requires adherence to core analytical principles: maintaining simple, transparent wave counts, avoiding low-conviction market entries, relying strictly on defensive stop-loss management, and combining Elliott Wave analysis with broader technical and fundamental confluence.