Wave analysis of EUR/USD for July 13. ECB repeats Fed action, US inflation nears 25-year high


The wave counting on the 4-hour chart for the Euro/Dollar instrument remains rather ambiguous. The retreat of quotes from the lows reached allowed us to assume that the downward wave c, and with it the entire downward trend segment, is over. However, today the instrument has lost about 80 basis points, so the downward trend can now take the form of a-b-c-d-e. Thus, the fact that the instrument continues to move mainly with the help of corrective wave sets continues to make it very difficult to work with it. It is very difficult to even react to very fast reversals and very short waves. Thus, the current wave counting now more or less accurately answers the question of what can be expected from the Euro/Dollar instrument now. However, this does not make it easier to work with the pair. Now it is completely unclear whether wave d in c will be built or whether a new upward trend section has begun to be built and we have already seen its first two waves. Even if wave c takes a five-wave form, it can end very soon and an increase in the instrument quotes will start anyway.

The news background for the Euro/Dollar instrument on Tuesday was reduced only to the report on inflation in the US. It was after this report that the quotes of the instrument fell by 80 basis points, further confusing the current wave counting. However, there have been other developments lately that deserve attention. Recently, the ECB changed its policy on inflation in the European Union, replacing the wording of the target level "below or about 2%" to "2% or slightly higher". In fact, all these formulations are so vague that it makes no sense to draw any specific conclusions from them. Let me remind you that last year the Fed and Jerome Powell also announced a change in the approach to defining the inflation target.

Powell then said that inflation would be allowed to go above 2% before the central bank began to retaliate. This approach was intended to compensate for periods of low inflationary pressures. What do we see now, in July 2021? Inflation in June was 5.4% YoY. And so far, the Fed is not even going to use tools to curb further acceleration of price growth. Thus, in the European Union, there may be about the same story. The ECB may allow inflation to rise above 2%, but everything will depend not only on inflation. The monetary policy of the ECB will primarily depend on the economic recovery, the recovery of the labor market (as in the United States). Inflation in such conditions is a secondary indicator.

Based on the analysis, I conclude that the construction of the downward wave can be completed. Thus, at this time, I recommend buying the instrument with targets located around 1.1917 and 1.1985, which corresponds to 61.8% and 50.0% Fibonacci, for each MACD signal "up". A successful attempt to break through the high of wave b did not take place, and the downward wave c may take a five-wave form. Even so, it should be over pretty soon.


The wave counting of the new downward trend is not entirely unambiguous, however, at this time, it is presumably completed or nearing its completion and has assumed a three-wave structure. Thus, now I am expecting a new low of the three-wave upward trend to be built.

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