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Wave analysis of EUR/USD for July 19. European inflation continues to disappoint


The wave counting on the 4-hour chart for the Euro/Dollar instrument remains quite ambiguous and downright complex. A new departure of quotes from the lows reached again allows us to assume that the downward wave c, and with it the entire downward trend section, is completed. However, the second wave of the expected new upward trend section has already gone beyond the low of the expected wave c. Such moments are undesirable, but still allowed by wave analysis.

The main difficulty lies in the fact that the very type of wave counting remains extremely confusing. Even if all waves are identified correctly, it is very difficult to trade if most of the waves do not exceed 100-120 pips. After all, it is necessary not only to determine the wave but also to find its starting point and the point of completion of the construction. So I continue to point out that the wave pattern is very complex right now. It is more or less clear on the higher wave scale. At this time, it is assumed that wave c has completed its construction. However, the instrument may well complicate it even further. Almost indefinitely.

The news background for the Euro/Dollar instrument was not the strongest and most interesting on Friday. During the day, several reports were released in the United States and the European Union, but I would pay the most attention to the inflation rate in the European Union. Inflation has been the main focus of the conversation lately. If everything is clear with US inflation, then with European inflation, there are many questions. It is growing like in other countries. Nothing is surprising here. But it is growing at a very slow pace.

A week ago, Christine Lagarde announced that the ECB is changing its approach to setting the inflation target, raising it slightly. However, if inflation in the UK and the United States is really growing, then in the EU - the growth ended at about 2%, which the EU sees as targeted. Given the fragility of the current acceleration in price growth, then we can assume that inflation will start to slow down in the coming months. Consequently, in the US and UK, it will begin to slow down towards the target levels, which is completely satisfactory for the Fed and the Bank of England. But in the European Union, inflation will continue to be below the target level. This will mean that the ECB cannot achieve price stability, which means that the programs to stimulate the economy must continue. This is a bearish factor for the euro.

Taking into account the wave analysis, which implies the completion of the construction of the next corrective set of waves, I believe that the likelihood of a new upward trend is now high. However, strong inflation in the US and weak in the European Union may lead to a complication of the downward trend.

Based on the performed analysis, I conclude that the construction of the downward wave c 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. This option will be canceled if the instrument makes a successful attempt to break the current low of wave c.


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

The material has been provided by InstaForex Company -