01.09.202619:11 Forex Analysis & Reviews: EUR/USD Analysis – September 1: The Dollar Is Weakening

The wave structure of the four-hour EUR/USD chart is becoming more complex. There is still no question of canceling the upward segment of the trend (lower chart), which began in January of last year. On the contrary, we have seen a complete corrective A-B-C structure, which has most likely been completed. We never saw a convincing wave 5 of C. This wave took a truncated form, which also occurs from time to time. Let me remind you that classical wave structures are generally found only in textbooks. In real-world conditions, traders and analysts should be more flexible in their analysis. Therefore, for a month now, I have been saying in my analyses that traders should prepare for a rise in the European currency. If the current wave structure is correct, the instrument is at the very beginning of a new upward segment of the trend.

On the lower time frame, I can identify a classical five-wave downward structure with a truncated wave 5. I had expected the European currency to decline to the 1.13 level, but the fundamental backdrop turned against the dollar, and sellers simply lacked the strength to form a convincing wave 5. Therefore, it can be considered that the formation of a new upward wave structure began on July 28.

ISM Index and JOLTS Report Fail to Support the Dollar

The EUR/USD exchange rate declined by 15 basis points on Tuesday, but it may recover all of its losses and move into positive territory by the end of the day. The first important data of the week was released today, giving traders new information to consider. In the morning, the European Union released its inflation report, which could have supported buyers, but unfortunately, the market had already anticipated the August figure. The Consumer Price Index rose to 3.3%, as market participants had expected. In my view, inflation at 3.3% gives the ECB room to tighten monetary policy at its next meeting. I believe that what matters is not even the relatively high inflation figure itself, but the trend. Inflation in Europe has been rising for most of 2026, while the ECB's monetary policy tightening in June resulted only in a two-month pause in the acceleration of inflation. In addition, oil prices fell to pre-war levels in July, meaning that inflation may have slowed not because of the ECB's rate hike, but because of lower energy prices. Now that crude oil prices are rising again, inflation is accelerating once more. Therefore, the ECB needs to take "hawkish" measures.

In the second half of the day, the ISM and JOLTS reports were released in the United States. Neither report provided support for the sellers. The ISM Services PMI fell to 54.6 points and, although this is still a very high reading, market participants had expected more. The same can be said about the JOLTS report. The market expected 7.3 million job openings in July but received only 7.271 million. The difference is small, but it is unfavorable for the dollar. As a result, the euro declined moderately in the first half of the day, while the dollar weakened in the second half.

General Conclusions

Based on my EUR/USD analysis, I conclude that the pair remains within the upward segment of the trend (lower chart), while in the shorter term, it has moved into a new upward wave structure. In my view, this is an excellent time to establish long positions. If the downward segment of the trend that began on January 28 does not develop into a more extended five-wave structure (which would require a strong fundamental backdrop in favor of the dollar), the EUR/USD pair is at the very beginning of a new, prolonged upward segment of the trend, with targets extending as high as the 1.25 level.

On the higher time frame, an upward segment of the trend is visible, after which the formation of a corrective wave structure began. The A-B-C structure is presumably complete. If this is the case, a new impulsive upward segment of the trend has begun.

Main Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often undergo changes.
2. If there is no confidence in what is happening in the market, it is better not to enter the market.
3. There can never be 100% certainty about the direction of a price move. Do not forget to use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.