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Wave analysis of EUR/USD for July 28. Fed needs to tackle overheated US stock market and housing market


The wave counting of the 4-hour chart for the Euro/Dollar instrument has not changed at all in recent days and remains quite ambiguous. This is especially true for the internal structure of the last descending wave. The wave pattern is more or less clear on a higher scale. At this time, wave c is presumably continuing its construction. At least the minimum deviation of quotes from the lows reached does not allow us to assume its completion. Thus, it is possible that this wave has already been completed, but the amplitude of the instrument's movements in recent days does not allow us to draw any conclusions at all. Also, today, the markets made an unsuccessful attempt to break through the 76.4% Fibonacci level, which indirectly indicates that they are not ready for new purchases. However, much will depend on the results of the Fed meeting, which will be announced in the evening. The amplitude of the instrument's movements can increase dramatically, but will this activity help in clarifying the wave pattern?

The news background for the Euro/Dollar instrument remains weak on Wednesday. There was no single news in the European Union and the United States that the markets could pay attention to for the entire day. Thus, an amplitude equal to 15 basis points is a logical continuation of the two-week horizontal movement. However, everything can change dramatically tonight. The markets can at least see a new trading vector and find out in which direction the Fed will look in the next 1-1.5 months, exactly before the next meeting. The intrigue now lies in only one question: will the "hawkish " rhetoric of Jerome Powell be strengthened? In recent months, there has been strong growth in US stock indices, the strongest growth in the US real estate market.

All this suggests that there is too much money accumulated in the economy, which is being transferred from its owners to the markets. As a result, there is a situation when the market becomes "overheated", which is extremely dangerous for the entire economy as a whole. The economy is a long and heavy locomotive. If it accelerates, it is extremely difficult to hit the brake. And the Fed continues to throw coal into the furnace, rising inflation is proof of this. Thus, tonight the markets will be waiting for Jerome Powell to make new statements about his readiness to complete the QE program for the American economy. If these statements are not followed, the US currency may experience market pressure on itself, and the Euro/Dollar instrument will begin building an upward wave, presumably as part of a new upward trend section. All the markets need now is a push in a certain direction.

Based on the analysis, I conclude that the construction of the descending wave c can be completed in the near future. However, wave c is constantly becoming more complicated, so a decline to the 100.0% Fibonacci level could help the markets. However, this decline may not happen if the Fed takes a "dovish" position tomorrow. To build a new upward wave, the Fed must talk again about ending the QE program. Purchases in small volumes are possible now, but they need to be insured with Stop Loss.


The wave counting of the new downward trend segment is not quite unambiguous, but at this time it is presumably completed or is nearing its completion and has adopted a three-wave structure. Thus, now I expect the construction of a new minimum three-wave upward trend section.

The material has been provided by InstaForex Company -