The wave pattern on the 4-hour EUR/USD chart has remained unchanged for several months, which is encouraging. Even during the formation of corrective waves, the integrity of the structure is preserved, allowing for accurate forecasts. It is worth noting that wave patterns do not always appear exactly as in textbooks.
The upward trend section continues to develop, with the news background still largely not favoring the U.S. dollar. The trade war initiated by Donald Trump continues, as does the confrontation with the Federal Reserve. Dovish expectations are rising. Trump’s “One Big Law” will increase U.S. national debt by 3 trillion dollars, while the U.S. president persistently raises tariffs and introduces new ones. The market’s assessment of Trump’s first six months in office is quite low, despite 3% economic growth in the second quarter.
At present, it can be assumed that wave 4 has been completed. If this is indeed the case, the formation of impulsive wave 5 has begun, with potential targets extending up to the 1.25 level. It is possible that corrective wave 4 could take a longer five-wave form, but I am proceeding based on the most probable scenario.
There was no significant news, but demand for the U.S. dollar continues to decline. On Thursday, the EUR/USD rate fell by 40 basis points, with price movements again very weak. The euro came under pressure from EU statistics, which once again showed very poor, mediocre results. According to economists’ estimates, GDP growth in the second quarter will not exceed 0.1% quarter-on-quarter. Industrial production in June fell by 1.3% month-on-month. While annual figures are slightly better, the improvement is marginal. The economy is likely to grow by 1.4% year-on-year in the second quarter, with industrial production up 0.2%. These results are better than six months ago, but still quite weak.
It is worth reminding that while the European Union managed to avoid high U.S. import tariffs, it did not avoid tariffs entirely. The trade deal with Donald Trump includes a 15% tariff on all imports to the U.S., significant investments in the U.S. economy, and mandatory purchases of American oil and gas. This agreement primarily benefits the U.S., while the EU only avoided its most negative scenario. Therefore, despite the ECB’s lowering of interest rates to “neutral” levels, expectations for an acceleration in the European economy—and consequently, strong industrial growth—should remain cautious.
However, these factors are not the key drivers for the euro. Demand for the U.S. dollar continues to weaken under pressure from Trump’s protectionist policies, the trade war, and the U.S. president’s influence on the Bureau of Statistics and the Federal Reserve. Global confidence in the U.S. government and the dollar is declining, which is weighing on the American currency. The wave structure of the upward trend is still incomplete, so I expect further price increases.
Overall conclusions:
Based on the EUR/USD analysis, the pair continues to form an upward trend section. The wave pattern remains highly dependent on the news background related to Trump’s decisions and U.S. foreign policy. Trend targets may extend up to the 1.25 level. Therefore, I continue to consider long positions with targets around 1.1875, which corresponds to the 161.8% Fibonacci level, and higher. I assume wave 4 has been completed, making this a good time for buying.
Key principles of my analysis:
- Wave structures should be simple and clear. Complex structures are harder to trade and are often subject to changes.
- If there is no confidence in the market situation, it is better to stay out.
- Absolute certainty in price direction is never possible. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
