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The wave layout on the 4-hour chart has taken a more complicated form over the past two days, but still confirms the main trend. Such an important event as the Fed's meeting could not be ignored by the markets. Therefore, the price movement did exactly follow the wave pattern. As I mentioned earlier, I expected to see the formation of a full-scale three-wave ascending structure. Although the three waves have been formed, the market failed to break through the 50.0% Fibonacci level. At the moment, the price has broken through the low of the b wave. This suggests that the supposed d wave may take an extended form. If not, than the d wave has completed its formation and has taken on a shortened form. It may now follow the trajectory of a set of new downward waves built within the e wave (on a larger time frame). A successful attempt to break through the 61.8% fibo level will indicate that market participants are ready to sell the instrument and renew local lows.
On Friday, the news background for the euro/dollar pair was extremely weak. There was no news and no economic reports. Thus, the fall in quotes was not caused by any macroeconomic events. However, this week was marked by the meeting of the US Federal Reserve Fed and statements made by Christine Lagarde and Jerome Powell. Therefore, the current decline in the euro/dollar pair could be a late reaction to these events. Let me remind you that ECB President Christine Lagarde announced yesterday that the European economy was likely to contract in the first quarter of 2021. This was hardly positive news for the euro. At the same time, the pair's decline was not critical. The 61.8% fibo level still serves as strong support. This means that the entire wave structure that was formed on March 9 may simply take on a more extended horizontal form. I would not be surprised to see a new ascending wave moving back to the 50.0% level. At the same time, I would like to note that today's drop in the euro could be caused by a new rise in the US 10-year Treasury yields. According to analysts, this indicator will continue to grow, and we already know that the US dollar gains ground when bond yields increase. Therefore, I would conclude that the formation of a new ascending trend section is restricted due to the growing bond yields.
According to the current analysis, buying the instrument is still relevant. This strategy will remain appropriate at least until the price breaks through the 61.8% Fibonacci level. You can open long positions on the pair after the price rebounds from this level considering the formation of another internal ascending wave within the assumed d wave. In this case, the target will be set lower than I planned near the estimated mark of 1.1974 which corresponds to the 50.0% Fibonacci level.
The wave pattern of the ascending trend section still has a fully completed five-wave structure and is not going to change yet. But the next part of the trend which immediately follows this pattern takes a rather complex form. The instrument is likely to form alternating three-wave structures in the near future. Therefore, I still expect the pair to rise by 200 pips within the estimated d wave.
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