The wave count on the four-hour chart for EUR/USD has become more complex. On the higher timeframe (lower chart), the downward trend segment has taken the form of a five-wave structure A-B-C-D-E, which may be complete at any moment, as it appears structurally complete. All waves within this segment are approximately equal in size, so it is considered corrective. If this assumption is correct, the completion of this structure will be followed by the development of an impulsive upward trend segment, with targets well above the 1.2000 level.

On the lower timeframe (upper chart), an impulsive wave sequence continues to develop and may belong to wave E of the higher timeframe. If this is indeed the case, the dollar's strengthening is nearing its end, regardless of how much further it rises. The presumed wave 5 of E is either complete or approaching 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 led to a strong appreciation of the US currency, but there are relatively few new reasons for further dollar strength.

The Euro Has Fallen to an Extreme Level

The EUR/USD exchange rate remained unchanged on Wednesday, but the absence of a decline today does not negate the euro's losses over the past four days and the past two months. Broadly speaking, ahead of the Federal Reserve meeting, the euro has reached a critical point. Either it will fall further, requiring the wave count to be revised or refined, or an upward trend segment will begin to develop, as indicated by the current wave-count scenario. The latest wave can still be classified as wave 5 of E. Therefore, the scenario involving the start of a prolonged and strong upward trend segment cannot yet be ruled out.

However, the euro's current position is undeniably weak. The market continues to interpret every news development in favor of the safe-haven US dollar, while the euro is now declining largely due to existing momentum. No major events took place in either the European Union or the United States today, yet the market still attempted to push the euro lower. The next move now depends on the Federal Reserve and Kevin Warsh's statements. Even the slightest hawkish signal, or a phrase not previously used by the Fed chair, could renew demand for the dollar and trigger another sharp decline in the euro.

From a logical standpoint, the market has already priced in even a December rate hike, which is still a month and a half away. Some analysts expect the FOMC to vote for a third policy tightening in March next year. However, in my view, the market has already priced in this scenario as well. Therefore, regardless of the perspective, the more the euro declines, the fewer reasons remain for further losses. In my view, the downward wave sequence should have been completed long ago.

General Conclusions

Based on the EUR/USD analysis, the pair remains within the global corrective trend structure A-B-C-D-E. However, this structure appears fully developed and may therefore be complete. In my view, this is a favorable time not only to consider buying the euro but also to anticipate the development of a full upward trend segment. According to the higher timeframe, the euro is expected to rise to at least the 1.1700–1.1800 level. The unsuccessful attempt to break below the 1.1126 level, corresponding to the 50.0% Fibonacci level (lower chart, higher timeframe), also indicates that the market may be ready for renewed buying.

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

Key Principles of My Analysis

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often involve changes in the expected pattern.
2. If there is uncertainty about current market conditions, it is better to stay out of the market.
3. There can never be absolute certainty about the direction of price movement. Do not forget to use protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.