EUR/USD Analysis on October 16, 2025

[Redator]

The wave pattern on the 4-hour EUR/USD chart has changed. It's still too early to conclude that the upward trend section has ended, but the latest decline in the euro required an adjustment of the wave count. We now see a series of three-wave structures (a-b-c), which can be assumed to form part of the larger wave 4 of the upward trend segment. In this case, wave 4 has taken an unnaturally extended form, but the overall wave structure remains coherent.

The formation of the upward trend continues, while the news background still supports everything but the dollar. The trade war launched by Donald Trump goes on. The confrontation with the Fed continues. The market's "dovish" expectations for Fed rate cuts are increasing. The U.S. government shutdown is still ongoing. Overall, the market's assessment of Trump's first seven or eight months remains unimpressive, even though economic growth in the second quarter reached almost 4%.

In my view, the upward trend is not yet complete. Its targets extend up to the 1.25 level. This means the euro could decline for a while longer without any fundamental justification (as it has over the past three weeks), yet the wave structure would still remain intact.

The EUR/USD rate gained about 50 basis points over Wednesday evening and Thursday. That's not much, but demand for the euro is slowly increasing — or, more accurately, demand for the dollar is slowly declining.

As I've noted in recent weeks, I see few convincing reasons for the dollar's continued strength. However, the market has seen fit to build another three-wave corrective structure, resulting in a lengthening and complication of the entire upward trend segment.

This week has been relatively quiet in terms of economic data, though political headlines are abundant. Donald Trump continues to attack China on all fronts, trying to push it toward compliance with U.S. demands. Meanwhile, Federal Reserve officials have offered comments on the current economic situation. Yet, in both areas, nothing truly new or significant has been said.

Notably, Fed official Steve Miran once again spoke of the urgent need to lower interest rates as soon as possible. Other policymakers also support monetary easing, though to a less aggressive degree. Some believe easing should be limited and moderate. The "doves" emphasize the weakness of the labor market and potential slowdown of the U.S. economy, while the "moderate hawks" point to inflation risks, which could spiral out of the Fed's control. As a result, the Fed faces a policy dilemma: Which is more important — the labor market or inflation?

General Conclusions

Based on the EUR/USD analysis, I conclude that the pair continues to form an upward trend. The wave pattern remains closely tied to the news background, especially developments related to Trump's decisions, as well as domestic and foreign policy actions by the White House administration. The targets of the current trend segment may extend up to the 1.25 level. At present, we are likely observing the construction of corrective wave 4, which is nearing completion, though it remains complex and elongated. Therefore, in the near term, I continue to consider only long (buy) positions. By year's end, I expect the euro to rise to the 1.2245 level, corresponding to 200.0% Fibonacci expansion.

On a smaller scale, the entire upward trend section is visible. The wave structure is not perfectly standard, as the corrective waves vary in size. For example, the larger wave 2 is smaller than the internal wave 2 within wave 3 — though such variations do occur. It's best to focus on clear, identifiable patterns rather than attempting to label every single wave. Currently, the upward structure appears consistent and logical.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex formations are difficult to trade and often require revisions.
2. If there is uncertainty about what's happening in the market, it's better to stay out.
3. There can never be 100% certainty about market direction — always use Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.

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