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Wave analysis of EUR/USD for November 3; ECB will not tighten monetary policy next year

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Wave pattern

The wave counting of the 4-hour chart for the Euro/Dollar instrument looks quite holistic now. The plot a-b-c-d-e, which is formed since the beginning of the year, is interpreted as wave A, and the subsequent increase in the instrument is interpreted as wave B. If this assumption is correct, then the construction of the proposed wave C has now begun and is continuing, which can take a very extended form.

The corrective wave b took a more complex form due to the sales of the US currency last Thursday, but on Friday, the decline in quotes resumed, which could be the beginning of a new extended wave c to C. Thus, wave b is currently considered completed. The assumed wave c can take no less extended form than wave a. Its targets are located below the 15th figure to the 13th. However, in order for this wave to continue its construction, a successful attempt to break through the 1.1541 mark is required, which corresponds to 61.8% Fibonacci level.

Markets focused on the Fed meeting and Christine Lagarde's speech

The news background for the Euro/Dollar instrument was excessive on Wednesday. Besides the key event of the day, which is the FOMC meeting, several significant reports were also noted. First is the unemployment report in the European Union for September, which saw a drop to 7.4%. Despite the decline, unemployment in the European Union remains high as compared to the UK or the USA. This also did not hinder the growth of the euro.

Second is the speech of ECB President Christine Lagarde. Lagarde said that the European Central Bank has formulated three conditions under which key rates will begin to rise. And despite the fact that inflation in the European Union has been growing recently, the medium-term forecast for this indicator remains restrained. This means that all three conditions are unlikely to be fulfilled next year. Thus, in terms of economic growth rates, as well as in terms of readiness to tighten monetary policy, the European Union is far behind America.

If we take into account these factors, the European currency does not currently have an advantage over the dollar. On this news, the European currency could have already declined, but the markets are obviously waiting for the evening meeting of the Fed, and only after its results will they be ready to trade.

General conclusions

Based on the analysis, I conclude that the construction of the downward wave C will continue, and its internal corrective wave has completed its construction. Therefore, now I advise you to sell the instrument for each "downward" signal from the MACD, with targets located near the calculated marks of 1.1454 and 1.1314, which corresponds to 76.4% and 100.0% Fibonacci levels.

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The wave counting of the higher scale looks quite convincing. The decline in quotes continues and now the downward section of the trend, which originates on May 25, takes the form of a three-wave corrective structure A-B-C. Thus, the decline may continue for several more months until wave C is fully completed.

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