Euro: Weekly Preview

[Ben Graham]

The upcoming week is unlikely to be notable or significant for the euro. Throughout 2025, the euro has simply been drifting with the tide. The dominant driver of the market remains the U.S. dollar—it's the dollar that rises or falls, while other currencies largely move in response. At present, there is a great deal of uncertainty in the foreign exchange market. Wave structure analysis continues to show nothing more than corrective three-wave patterns that provide little clarity, as any corrective structure can extend or evolve at any moment.

Currently, a downward three-wave pattern has formed, which could indicate the beginning of an upward mirror structure. However, confidence in such a scenario is low.

The key issue is that the market has more than enough reasons to continue selling off the U.S. dollar—but it hasn't been doing so for several weeks. Consequently, if the news flow isn't materially influencing investor sentiment, euro weakness may persist.

In the eurozone next week, the most notable events will be two speeches from Christine Lagarde and the release of the October purchasing managers' indexes (PMIs) for the services and manufacturing sectors.

It's unlikely that Lagarde will present any new, meaningful developments, though Friday's slightly hotter-than-expected inflation reading might prompt her to comment. But what would that mean for the euro?

In essence, not much. The European Central Bank has already ended its rate-cutting cycle, and higher inflation makes further easing even less likely. On the other hand, there's still no reason to consider tightening—too little time has passed, and the rise in inflation remains modest. Thus, the PMIs released on Friday will likely be the most relevant reports of the week, but no dramatic surprises are expected. As a result, no major market moves are anticipated either.

Wave Analysis of EUR/USD:

Based on the current wave analysis, EUR/USD continues to build a bullish segment of the trend. The wave structure remains heavily influenced by news flows, particularly related to Trump's decisions and the internal and external policies of the new White House administration. The target zone for this trend could extend toward the 1.25 area. At present, the market appears to be forming corrective wave 4, which is nearing completion. This structure is particularly long and complex, but still fits the overall bullish trend shape. Consequently, I continue to view buying opportunities as more favorable. By year-end, I expect the euro to rise to 1.2245, which corresponds to the 200.0% Fibonacci level.

Wave Analysis of GBP/USD:

The wave structure of GBP/USD has shifted. The pair remains within a bullish impulse wave, but the internal layout has become more complex. Wave 4 is developing into a three-wave corrective pattern that is significantly longer than wave 2. The most recent downward three-wave correction appears to be complete. If confirmed, the upward movement within the global wave structure is likely to resume. Initial targets remain at 1.3800 and 1.4000. As always, price action should be confirmed by technical signals and key levels, but these wave structures provide a broader framework for medium-term trend direction.

Key Principles of This Wave Analysis:

1. Wave structures should be simple and understandable. Complicated structures are difficult to trade and are more likely to shift.
2. If there is uncertainty about market conditions, it is better to stay out.
3. There is never absolute certainty in market direction. Always use stop-loss orders.
4. Wave analysis can and should be combined with other tools and trading strategies for a comprehensive approach.

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