On the H4 chart, the wave pattern of the EUR/USD pair remains quite vague, since two corrective trend sections have already been formed and the third, downward trend, is most likely starting to form. If this assumption is correct, the quotes will continue to decline with targets located around 15th and 16th marks. At this time, waves a and b have presumably completed their construction. Moreover, wave a received a very complex internal wave pattern. Given that the correction sections of the trend often take a rather complex form, it is recommended to try tracking the higher-order waves. If we look closely at the waves of the previous upward trend, their internal structures are also very complex and difficult to read. It is worth noting that the wave pattern should be as clear as possible so that one can trade and earn a profit on it, and not just draw and label waves.
The news background for this instrument was not very strong on Wednesday. Nevertheless, there were several interesting reports released in the morning, which were available to the markets to analyze. First, the EU published its inflation data, which slowed down at the end of June and amounted to 1.9% yoy. Such a decline already suggests that the ECB representatives, particularly Christine Lagarde, were right when they said that the increase in consumer prices is a temporary phenomenon caused by temporary factors. As we can see, prices began to slow down their growth at the end of June and inflation may now begin to decline again. Therefore, the ECB may announce soon that inflation is still lacking and does not meet the target value. It should be noted that one of the ECB's goals is just stable inflation at the level of 2% yoy. Given that inflation has barely reached this level in recent months, it is unlikely that this target can be considered achieved. Therefore, the chances of curtailing the program to support the economy are reduced due to insufficient price growth.
In addition, the markets could not help but pay attention to the ADP report on the change in the number of people employed in the US private sector. This report is similar to Nonfarm Payrolls but less important. Still, the markets often pay attention to it. Here, the value of 692,000 (with market expectations of 555,000) caused an increase in demand for the US currency, which fully corresponds to the current wave pattern. Unfortunately, a more important report (just Nonfarm Payrolls) will only be published this Friday, as strong ADP report absolutely does not guarantee a high Nonfarm value.
Based on the analysis, the quotes of the instrument are expected to make a new decline within the expected wave c. The supposed wave b might be done with its formation. Thus, it is suggested to sell the euro with targets located near the calculated levels of 1.1836 and 1.1704, which equates to 76.4% and 100.0% Fibonacci, for each MACD downward signal.
The wave pattern of the new upward trend section is not quite clear, but it is presumed to be completed now and has taken on a three-wave form. Thus, the three downward waves are expected to be formed. The first wave may already be completed, while the second one is in the process of completion or is also already completed.
The material has been provided by InstaForex Company - www.instaforex.com