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The wave layout on the 4-hour chart for EUR/USD has remained unchanged for several months, which is encouraging. Even when corrective waves are being formed, the integrity of the structure is preserved. This allows for accurate forecasting. It is worth noting that the wave structure does not always look like it does in textbooks. At present, however, it still looks very clear.
The upward trend section continues to build, and the news backdrop continues to favor currencies other than the dollar. The trade war launched by Donald Trump is ongoing. Confrontation with the Fed persists. The market's dovish expectations regarding Fed rates are growing. Market participants have rated the results of Trump's first 6–7 months very poorly, even though second-quarter economic growth reached 3%.
At this stage, it can be assumed that the formation of impulse wave 5 is ongoing, with targets potentially extending up to the 25th figure. Within this wave, the structure is somewhat complex and ambiguous, but its broader scale raises no concerns. Currently, three upward waves can be identified, meaning that by the end of this week the instrument has shifted to forming wave 4 within 5.
The EUR/USD rate barely changed during Tuesday. The US session has only just begun, so movement amplitude may increase before the day ends. However, regardless of today's, tomorrow's, or even the day after tomorrow's volatility, there are no reasons at the moment to expect the instrument to decline. The current wave structure leaves no unanswered questions. We have seen three new upward waves; at present, wave 4 within 5 is developing, which may take a three-wave form. Even so, any new decline is unlikely to be stronger than wave a within 4 of 5. Consequently, another pullback is possible, but it is unlikely to drop below the 17th figure.
Tuesday could have been an interesting day, but so far boredom has prevailed. Morning PMI releases did not support the euro, but neither did they benefit the dollar. In Germany (the EU's largest economy), manufacturing activity fell, while services activity increased. The same was true across the euro area as a whole. As a result, neither bulls nor bears had an advantage in the morning.
Later in the day, US PMIs will be released, but I do not expect them to significantly alter the current wave structure. The wave picture allows for a short-term decline, but forecasts a new upward wave. Later in the evening, Jerome Powell's speech may spark stronger market reactions, and the dollar will likely face pressure, as the FOMC's stance remains dovish.
Based on the EUR/USD analysis, I conclude that the instrument continues to form an upward trend section. The wave layout still depends entirely on the news backdrop linked to Trump's decisions and the foreign and domestic policy of the new White House administration. Targets for the current trend section may extend up to the 25th figure. The news backdrop remains unchanged; therefore, I continue to stay in long positions, despite the completion of the first target around 1.1875, which corresponds to the 161.8% Fibonacci level. By year-end, I expect the euro to rise toward 1.2245, which corresponds to the 200.0% Fibonacci level.
On the smaller scale, the entire upward section of the trend is visible. The wave layout is not entirely standard, since corrective waves vary in size. For example, the larger wave 2 is smaller than the internal wave 2 within 3. However, such cases do occur. I would like to remind you — it's best to identify clear and readable structures on the chart rather than trying to label every single wave. The current upward structure leaves little room for doubt.
Main principles of my analysis:
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