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22.09.2025 06:19 PM
The wave analysis on the 4-hour EUR/USD chart has remained unchanged for several months now, which is very encouraging. Even when corrective waves are forming, the overall structure stays intact. This allows for accurate forecasting. It's worth noting that wave patterns don't always appear textbook-perfect. However, the current pattern still looks quite solid.
The formation of the upward trend segment continues, and the news background mostly fails to support the dollar. The trade war initiated by Donald Trump is ongoing. The standoff with the Federal Reserve also continues. The market's "dovish" expectations for the Fed rate are growing. The market holds a rather grim view of Trump's performance during his first 6–7 months in office, despite the 3% economic growth recorded in the second quarter.
At present, we can assume that an impulse wave 5 is in progress, with potential targets extending toward the 1.25 level. The internal structure of this wave is relatively complex and ambiguous, yet its higher-level composition raises few questions. Currently, three upward sub-waves can be seen, which indicates that by the end of last week the pair transitioned into forming wave 4 of 5.
During Monday's trading session, EUR/USD climbed by 35 basis points. The movement amplitude wasn't very high, which is unsurprising for a news-light Monday. At the end of last week, the euro lost about 150 basis points, but that drop had no significant impact on the wave pattern. Therefore, I maintain the conclusion that the upward portion of the trend remains in place.
Many traders tend to panic in situations where there's really no reason to. Often, traders see prices moving in the "wrong" direction and start frantically opening and closing positions, forgetting that corrections are a natural part of any trend. From my point of view, the decline we saw at the end of last week was simply a corrective wave that fits neatly into the current wave structure. It can be classified as wave 4 within the larger wave 5.
If this assumption is correct, the instrument is now transitioning into forming wave 5 of 5; however, wave 4 could still theoretically develop into a three-wave pattern similar to wave 2 of 5. Therefore, we must be prepared for another decline. However, under current market conditions, any new decline will present a good buying opportunity.
Recent news has made it increasingly clear that the interest rate gap between the Fed and the ECB will narrow over time. I would like to remind you that currently, this gap favors the U.S. dollar, yet the dollar has gained no real benefit from this advantage. Consequently, as the situation begins to shift (which it already is) in favor of the euro, we can expect a renewed upward move in the instrument. Keep in mind, the Fed's rate-cutting process is a gradual one. The dollar will have ample time to form a new upward trend segment.
Based on the EUR/USD analysis, I conclude that the instrument continues to form an upward trend segment. The wave structure still largely depends on the news backdrop—especially related to Trump's decisions, and the foreign and domestic policy of the current White House administration. The targets for the current trend segment may reach as far as the 1.25 level. Given that the news environment has not changed, I continue to hold long positions, despite the fulfillment of the first target near 1.1875, which corresponds to 161.8% on the Fibonacci scale. By the end of the year, I expect the euro to rise to 1.2245, which equals 200.0% Fibonacci.
On a smaller scale, the entire upward trend is visible. The wave structure isn't the most conventional, as the corrective waves vary in size. For example, the larger wave 2 is smaller than internal wave 2 within wave 3. But such discrepancies do occur. Remember, it's best to identify clear structures on the chart rather than get hung up on every single wave. The current upward structure raises minimal doubts.
Core Principles of My Analysis:
