Wave analysis of EUR/USD for July 9. ECB slightly changes monetary policy, euro responds with a moderate increase

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The wave counting on the 4-hour chart for the Euro/Dollar instrument remains rather ambiguous. Yesterday's departure of quotes from the lows reached suggests that the supposed wave c in the composition of the downward corrective set of waves has already been completed. At least three waves can be seen inside it, which can be a-b-c. If this is the case, then the entire downward trend may be completed. In recent months, the instrument has only moved in three-wave structures. However, at the same time, it should be recognized that both wave c and the entire downward section of the trend can easily and simply transform into more complex structures at any time. Thus, I believe that it is necessary to wait for confirmation of the completion of wave c, and only after the purchase of the instrument is completed. At this time, such confirmation may be a successful attempt to break the supposed wave b in c.

The news background for the Euro/Dollar instrument remained rather weak on Friday. Yesterday, the instrument gained about 50 basis points, today - another 10. Thus, yesterday it was still possible to talk about a certain reaction of the markets to events related to the ECB and its change in monetary policy related to inflation. It is difficult to say how a rise in the inflation target for the first time in almost 20 years could have led to an appreciation of the European currency, but markets could indeed have responded that way. Today, they had nothing to react to.

ECB President Christine Lagarde, in her speech today, did not tell the markets anything new, only explaining what the term "target inflation of 2%" would mean now. According to her, a decision has now been made to slightly raise the target level, although its interpretation remains extremely vague. Inflation will be allowed to slightly exceed the 2% level, but in general, the ECB considers it undesirable to reduce or increase the price level below or above the 2% level. The ECB wants to achieve the highest possible price stability. Meanwhile, America has even fewer important events and news today. Thus, the very restrained dynamics of the instrument is fully explainable.

Therefore, I believe that this week is over. Now the markets need to prepare for next week, for the publication of inflation reports in the European Union and the United States. Analysts do not expect inflation to accelerate either in the US or in the EU by the end of June. In America, the price level may slow down to 4.9% YoY, while in the European Union - remain unchanged at 1.9% YoY.

Based on the analysis, I conclude that the construction of the downward wave continues, but at the same time, it can be completed at any time. Thus, at this time, I recommend selling with targets located around 1.1701 and 1.1552, which corresponds to 100.0% and 127.2% Fibonacci, for each MACD downward signal. A successful attempt to break the high of wave b in the composition of assumed c may indicate the completion of the entire wave c.

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The wave counting of the new upward trend section is not entirely unambiguous, however, at this time, it is presumably completed and has taken on a three-wave form. Thus, now I expect the construction of three downward waves, and the third wave can turn out to be almost any in length. At the same time, the trend section can take on a five-wave form.

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

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