18.05.202216:57 Forex Analysis & Reviews: EUR/USD analysis on May 18

The wave marking of the 4-hour chart for the euro/dollar instrument continues to look convincing and does not require adjustments. The instrument has presumably completed the construction of the descending wave 5-E, which is the last in the structure of the descending trend section. If this is indeed the case, then at this time the construction of a new upward trend section has begun. It can turn out to be three-wave, or it can be pulsed. One way or another, the instrument has made a strong step towards completing a long downward section. The supposed wave 5-E turned out to be a pronounced five-wave, so its internal wave marking is beyond doubt. The only option in which the decline of the euro can resume is a strong complication of the entire downward section of the trend. It cannot be completely excluded, but I advise you to consider it as a backup option. The coming days will be crucial for the instrument, as Tuesday's success will need to be developed. Without this, the instrument can very quickly return to decline.

Jerome Powell's statements no longer affect the mood of the market.

The euro/dollar instrument fell by 35 basis points on Wednesday. The news background of today was weak, so the market decided to just wait it out a bit. Jerome Powell spoke last night and repeated all the theses that we have heard many times already. 2% inflation is the main goal of the Fed. It will be very difficult to achieve it due to various external factors. The Fed is ready to raise the rate at the pace that will be required to achieve the inflation target. The American economy is not in danger of a recession. However, in my humble opinion, now a lot will depend not on the statements of Powell or other FOMC members, but real changes in the economy. Let me remind you that the unemployment rate in the United States has returned to the levels that were observed before the pandemic, that is, to the minimum. When unemployment is very low, wage inflation begins. Employers are forced to fight more actively for employees, offering them higher wages. And the growth of wages causes an increase in demand. An increase in demand with a supply that has not fully recovered causes inflation. This is the first problem of the American economy.

The second problem is external factors that also spur inflation to growth. The Ukrainian-Russian conflict has already led to a large-scale increase in energy prices. And energy carriers are such a thing that no production, no logistics chain, no house can do without. Thus, if oil and gas prices are rising, then prices are rising for everything. In addition, prices will now rise for food, as Ukraine is one of the main exporters of grain and derivative products in the world. Powell himself has also repeatedly noted that the situation with COVID in China, which caused new "lockdowns", further disrupted logistics chains around the world. Logistics chains are disrupted, and many goods cannot be produced in the right quantities and delivered to end consumers - shortage - price growth - inflation. Thus, the Fed simply cannot physically influence all the factors that spur inflation.

General conclusions.

Based on the analysis, I conclude that the construction of wave 5-E is completed. If so, then it is already possible to buy a tool with targets located near the estimated 1.0720 mark, which is equivalent to 200.0% Fibonacci, for each MACD signal "up". The downward section of the trend may still become more complicated, but it is already a backup option.

On a larger scale, it can be seen that the construction of the proposed wave E has been completed. Thus, the entire downward trend has acquired a complete look. If this is true, then in the future for several months the instrument will increase with goals, near the peak of wave D, that is, to the 15th figure.