09.06.202600:49 Forex-elemzések és áttekintések: Euro Currency. Weekly Preview

The European currency found itself in a knockout at the end of last week, but may rise from the ashes shortly. As I mentioned, the wave structure of the downward segment of the EUR/USD trend looks complete, so the European currency may build a bullish wave set in the near future. Undoubtedly, the strengthening of the euro will largely depend on geopolitical factors. Therefore, if Iran and the U.S. manage to agree on a memorandum of understanding, negotiate another ceasefire, and unlock the Strait of Hormuz, it will provide significant support for all risk currencies, including the pound and the euro. Conversely, if the conflict persists along with the blockade of the strait, the European currency may only anticipate a corrective wave set, after which a new impulsive downward segment of the trend will begin.

This week, there will be several important events in the European Union, but I will focus my attention on the most crucial one – the European Central Bank meeting. At the beginning of the week, the market is confident that the ECB will raise interest rates by 25 basis points on Thursday. This has been reiterated recently by several ECB officials, although not all. There may be a few opponents of tightening monetary policy on the ECB Board, but the "hawks" are likely to prevail.

In my opinion, an increase in ECB rates will support the euro, which is currently set on a bullish trajectory, regardless. The market often prices events in advance; however, this is not the case now, as demand for the euro has been declining in recent weeks. Therefore, the ECB's policy tightening, already known, has not yet been priced in by market participants. If this assumption is correct and geopolitics does not lead to a new collapse, the euro could have good prospects ahead.

It is also important to consider what signals the ECB and Christine Lagarde are sending to the market. The central bank may raise rates once, or it may be preparing for a whole cycle of increases, given that inflation in the EU has been rising for five consecutive months. The conflict in the Middle East is not ending and is much closer to escalation than to a peace agreement. Consequently, oil prices are unlikely to decrease in the near term, and inflation may continue to accelerate.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument remains within a bullish trend segment, while in the shorter term, it is within a downward trend segment that may already be complete. In my view, this is a good time to try to establish long positions. An unsuccessful attempt to break through the 1.1513 mark, which corresponds to 76.4% on the Fibonacci scale, combined with the completed appearance of the downward trend segment, suggests that the instrument will transition to forming a bullish wave set with targets around the 17 figure and higher.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become clearer. Currently, the instrument has formed three downward waves, while EUR/USD has formed five. Therefore, the pound may be limited to constructing a corrective structure, and both currency pairs may begin building bullish trend segments. At this point, it is only an assumption, but a probable one. If correct, the instrument will start rising with targets around the 35 figure and above. Market participants currently have a good opportunity to buy.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to play because they often require changes.
2. If there is uncertainty in the market, it is better not to enter.
3. There is no 100% certainty in the direction of movement, nor can there ever be. Do not forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.