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I advise beginner traders to trade based on the wave structures that occur most frequently. Anyone who has studied wave analysis, even superficially, knows that impulsive structures consist of five waves, while corrective structures consist of three waves. After an impulsive structure is completed, a corrective structure begins, and vice versa. Of course, standard structures do not always occur in the real market, but when they do, beginner traders can trade based on them.
At present, we are dealing with a structure that may take a five-wave form. We have seen a clear three-wave correction, which can be identified as wave 2 or B. Therefore, after its completion, the formation of a new impulsive structure began. The first wave of this structure turned out to be quite extended and contains no internal corrective waves. Therefore, a corrective wave may begin in the near future. At present, the instrument is approaching the 1.1420 level, which corresponds to 161.8% on the Fibonacci scale. An unsuccessful attempt to break through this level would indicate that the market is ready to form the long-awaited corrective wave.
I would also like to remind you that the news background often has a strong influence on the wave structure. At present, it is difficult to expect further strengthening of the US currency based on the news background. In recent weeks, the wave structure allowed for EUR/USD to rise, but the news pushed the price lower. The news-driven decline has ended, but the US currency continues to strengthen.
The news background is virtually absent in the first half of the week. In recent weeks, the market has focused exclusively on the Fed's monetary policy, but in the near future it may shift its attention to geopolitics. Of course, this will happen only if Donald Trump actually makes a "major decision" regarding Iran. However, beginner traders should remember the TACO principle, which literally stands for "Trump Always Chickens Out." In other words, "Trump always backs down." This principle essentially means that many of Trump's threats, promises, and plans are not implemented in practice. It is enough to recall the US president's recent intention to impose a complete economic blockade on Iran. However, the White House leader's latest plan implied that countries maintaining business relations with Tehran would sever those ties. But who needs that? Trump once again attempted to involve other countries in the conflict so that someone else would bear the burden for the United States. Naturally, neither China nor Turkey needs this at all, while the conflict between Trump and Iran is a conflict between Trump and Iran. Other countries are not involved.
I would also note that Trump has virtually no effective means of pressuring Iran. An economic blockade will achieve nothing unless all countries maintaining business relations with Tehran join it. Further strikes against Iran would also produce no results. What else could Trump do?
Based on the EUR/USD analysis, I conclude that the pair remains within a downward trend segment that may take either a three-wave or five-wave form. After a decline of 220 basis points, it is reasonable to expect the formation of a corrective wave. An unsuccessful attempt to break through the 1.1420 level, which corresponds to 161.8% on the Fibonacci scale, would indicate that the market is ready to take some profits on short positions, which could lead to a rise in the instrument toward 1.1470 and 1.1509, corresponding to 127.2% and 100.0% on the Fibonacci scale, respectively. I expect a correction this week.
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