15.10.202607:29 Forex-elemzések és áttekintések: EUR/USD Analysis – October 15: What Has Changed Following the Inflation Report?

The wave count on the four-hour EUR/USD chart has become more complex. On the higher time frame (bottom chart), the downward trend segment has taken the form of a five-wave structure, A-B-C-D-E, which could be complete at any moment, as it appears to be fully developed. All waves within this segment are approximately the same size, so the structure is considered corrective. If this assumption is correct, an impulsive upward trend segment will begin to develop once the correction is complete, with targets well above the 1.2000 level.

On the lower time frame (top chart), an impulsive wave sequence continues to develop, potentially forming part of wave E on the higher time frame. If this is indeed the case, the dollar's strengthening is nearing its end, regardless of how much further it rises. Wave 5 of E is either complete or close to completion. In either case, the current wave structure suggests that the downward wave sequence is nearing completion on both charts. News developments and a sharp shift in market sentiment have driven a strong rally in the US dollar, but the number of new factors supporting further dollar strength is steadily decreasing.

US Inflation Rose More Than the Market Expected

The EUR/USD exchange rate fell by 100 points on Wednesday but subsequently recovered by 130 points. In my view, the euro's sharp rebound indicates that the downward trend segment has been completed. Both wave counts, on the higher and lower time frames, point to the completion of the downward wave sequence. If this is indeed the case, current conditions offer a favorable opportunity to buy the euro, and traders may anticipate not merely a corrective wave but a sustained upward trend.

The US Consumer Price Index triggered significant volatility in the currency market yesterday. Initially, the market rushed to buy the dollar again because US inflation rose more than expected, potentially signaling a more hawkish stance from the Federal Reserve. However, within a few hours, market participants reasonably concluded that stronger inflation was unlikely to change the FOMC's policy stance. To put it simply, if inflation had exceeded 4%, for example, the Fed might eventually have adopted a more hawkish stance, as it would have become clear that more aggressive measures were needed to bring inflation back to 2%. However, inflation exceeded expectations by just 0.1 percentage points. In practical terms, the report changed very little.

The widely cited CME FedWatch Tool also supports this assessment. According to the indicator, the probability of a policy tightening in September remained virtually unchanged. The probability of a tightening in December also remained unchanged. In other words, the market continues to expect a pause in October and a rate hike in December. Further forecasts are not meaningful at this stage, as they will depend on developments in the Middle East conflict, the US congressional elections, the course of the Middle East conflict following the congressional elections, and the possibility of an energy ceasefire agreement between Ukraine and Russia.

General Conclusions

Based on the EUR/USD analysis, the pair remains within the broader corrective trend structure A-B-C-D-E. However, this structure appears fully developed and may therefore be complete. In my view, current conditions are favorable not only for buying the euro but also for anticipating a sustained upward trend segment. According to the higher time frame, the exchange rate is expected to rise to at least the 1.1700–1.1800 level. The unsuccessful attempt to break above 1.1126, corresponding to the 50.0% Fibonacci retracement level (bottom chart, higher time frame), also indicates that the market may be preparing to move higher.

The higher time frame shows a downward trend segment that has taken the form of an A-B-C-D-E structure. The internal wave structure of wave E has developed into a five-wave impulse pattern, which may already be complete. If this assumption is correct, a new upward trend segment will begin to develop.

Key Principles of the Analysis

1. Wave structures should be simple and easy to understand. Complex structures are difficult to trade and often involve changes in the expected market pattern.
2. If there is uncertainty about market conditions, it is better to stay out of the market.
3. There can never be absolute certainty about the direction of price movements. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.