Euro Currency: Weekly Preview

[Ben Graham]

The European currency has seen demand over the past two weeks; however, while this phrase sounds promising, in reality, we have observed very weak growth in the euro. Even on the EUR/USD chart, it's clear that we witnessed nothing more than yet another corrective wave within countless other corrective waves and structures. The formal targets of the proposed wave 3 or C have been reached, so the instrument may begin a new decline as early as next week. This could occur as part of wave 4 of the same upward corrective structure or within a new downward structure. The essence remains unchanged: the euro still cannot resume the formation of an upward trend.

The news backdrop lately has been like a last hope. The market, for the most part, is not moving in either direction. For five consecutive months, trading has occurred between the 14 and 18 figures. Inside this range, there have been countless corrective waves. Each week, traders highlight the most important events in the calendar, hoping that this time the market won't ignore yet another FOMC meeting, another tariff announcement from Donald Trump, another "economic calamity" in the US, or something similar. Instead, we continue to see correction after correction.

Next week, the situation may remain the same. In the Eurozone, only two reports and a noteworthy speech are expected over the next five days. Germany will first publish data on industrial production, followed at the end of the week by November inflation data, for which the market is already familiar with the preliminary figures. Additionally, on Wednesday, European Central Bank President Christine Lagarde will give a speech. The chances of the ECB head making interesting and important statements are minimal, but they still exist. Honestly, looking at the European news backdrop evokes no emotions. It is likely that these events will not bring anything new to the harsh realities of EUR/USD.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument continues to build on the upward section of the trend. The market has paused in recent months, but Donald Trump's policies and the Fed's actions remain significant factors in the US dollar's future decline. The targets for the current trend section could extend up to the 25th figure. However, the last upward segment has once again taken on a corrective appearance; thus, a downward wave within this segment may begin, with a maximum leading to a new downward corrective set of waves.

Wave Picture for GBP/USD:

The wave picture for GBP/USD has transformed. We continue to deal with an upward impulse section of the trend, but its internal wave structure has become complex. The downward corrective structure a-b-c-d-e in C of 4 appears quite complete. If this is indeed the case, I expect the main trend section to resume its build with initial targets around the 38 and 40 figures. However, wave 4 itself may also take on a five-wave appearance.

In the short term, I anticipated the formation of wave 3 or c with targets around 1.3280 and 1.3360, corresponding to the 76.4% and 61.8% Fibonacci levels. These targets have been achieved. Wave 3 or C may continue its build, but the current wave set is likely corrective again. Consequently, a decline at the beginning of next week is also possible, and the attempt to break the 1.3360 mark has been unsuccessful.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often bring changes.
2. If there is uncertainty in what's happening in the market, it is better not to enter.
3. There can never be 100% certainty about the direction of movement. Always remember to use protective stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.

The material has been provided by InstaForex Company - www.instaforex.com