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Wave analysis of EUR/USD for August 19. Markets continue to rejoice at growing chances of Fed stimulus removal


The wave counting of the 4-hour chart for the Euro/Dollar instrument remains unchanged for the time being. The decline in quotes yesterday and today by 60 basis points allowed the expected wave e to take a five-wave form. However, even a successful attempt to break through the 100.0% Fibonacci level does not yet allow us to assume an even greater complication of the downward wave e. This wave now looks quite convincing, so the construction of a corrective set of waves suggests itself. Moreover, today the instrument has already increased by 35 basis points but has already made an unsuccessful attempt to break through the 100.0% Fibonacci mark from below. Thus, despite all the apparent completeness of the proposed wave e, there is still a possibility that the decline in quotes will resume, and the entire section of the trend will become more complicated once again.

The news background for the Euro/Dollar instrument was almost zero on Thursday. However, all the most interesting things happened not this afternoon, but late last night and tonight. It should be noted right away that few people really expected anything important from the Fed minutes. And they were right. Since there was no new information unknown to the markets in the protocol published in the evening. The whole point of the protocol was that several FOMC members (out of 19) already support the curtailment of the quantitative stimulus program. Moreover, the exact number of them is not specified in the protocol. There may be 5 of them, or there may be 10. The protocol also reflects the concerns of some members about high inflation values in recent months, as well as a possible slowdown in the economic recovery amid the growing number of cases of coronavirus infection in the United States.

Thus, in general, the mood of FOMC members is becoming more "hawkish" on the issue of tightening monetary policy. But no concrete decisions have been made yet. No specific dates for the completion of QE have yet been named. The markets can only expect that Jerome Powell will touch on this topic next week in Jackson Hole, or the Fed will announce this after its next meeting in September. Nevertheless, the demand for the US currency has been growing in recent days and even weeks, which allowed the current section of the trend to take a five-wave form. Today, a report on the number of claims for unemployment benefits was released in America. Their total number decreased to 2.82 million as of the beginning of August. Thus, the real unemployment rate continues to decline, which gives reason to hope for the curtailment of the QE program in September or November.

Based on the analysis, I conclude that the construction of the downward trend section could have ended around the level of 1.1704, which is equal to 100.0% according to Fibonacci. Wave e has received a more pronounced five-wave internal structure, so now I expect the beginning of building an upward set of waves or complicating the current trend section. A successful attempt to break through the 100.0% Fibonacci (1.1704) will indicate the readiness of the markets to buy the instrument. If the markets find the strength to keep the instrument above the 17th figure, then I advise you to buy euros for each MACD signal "up" in order to build a new upward set.


The wave counting of the higher scale looks quite convincing. We see three three-wave sections of the trend, which are approximately the same in size. However, the last section of the trend quite unexpectedly began to take a more complex form, but it can still end in the near future.

The material has been provided by InstaForex Company -