The wave pattern on the 4-hour EUR/USD chart has remained unchanged for several months. The upward segment of the trend continues to develop, while the news background continues to support all currencies—except the dollar. The trade war initiated by Donald Trump was intended to increase budget revenues and eliminate the trade deficit. However, these goals have not been achieved so far. Trade agreements are being signed with great difficulty, and Trump's "One Big Law" is projected to increase the U.S. national debt by 3 trillion dollars over the coming years. The market holds a very low opinion of Trump's performance in his first six months, viewing his actions as a threat to America's stability and well-being.

At this point, Wave 3 of Wave 3 is presumably complete. If this assumption is correct, the instrument has entered Wave 4 of Wave 3, which may take on a three-wave structure. However, the news background will play a key role in shaping the corrective wave sequence. The current weak background for the dollar could lead to the formation of a single-wave correction.

On Monday, the EUR/USD rate dropped by 100 basis points during the U.S. trading session. Over 6–7 hours, this marks a substantial loss for the euro. However, these losses are not surprising. This morning, it became known that the U.S. and the EU managed to avoid further escalation and reached a trade agreement. There are several explanations for the euro's decline and the dollar's rise.

First, if demand for the U.S. dollar had been declining for six consecutive months due to the ongoing escalation of the global trade war, then news of de-escalation should logically boost demand for the dollar—regardless of which side the agreement favors.

Second, the deal itself appears to benefit the dollar. Its terms (which will be discussed later) suggest that the U.S. gains everything, while the EU merely avoids tariffs of 30% or higher.

Third, a more technical explanation for the euro's fall is that the presumed Wave 4 is taking on a three-wave structure, meaning that subwave C of Wave 4 has now begun.

It is quite possible that all three factors contributed to Monday's decline in the instrument.

Two Scenarios for EUR/USD Going Forward

1. Scenario One: Subwave C of Wave 4 will be completed within the next one to two weeks, after which a new upward segment of the trend will begin.
2. Scenario Two: The upward segment of the trend has ended due to the sharp de-escalation of the trade war, and the dollar is now set to recover previous losses.

In my view, there is currently no solid basis for expecting the second scenario—or at the very least, the grounds are insufficient. We've only seen one day of dollar strength so far. Therefore, more data is needed before expecting an early end to the upward trend segment.

Conclusions

Based on the EUR/USD analysis, I conclude that the instrument continues to form an upward trend segment. The wave structure remains highly dependent on the news background, particularly on Trump's decisions and U.S. foreign policy. The targets of the trend segment could extend as far as the 1.25 level. Accordingly, I continue to view long positions with targets around 1.1875 (which corresponds to 161.8% Fibonacci) and higher.

The failed attempt to break through the 1.1572 level (which corresponds to 100.0% Fibonacci) indicates that the market is prepared for new euro purchases, although the presumed Wave 4 appears to be forming a three-wave structure.

My Key Analytical Principles:

1. Wave structures should be simple and understandable. Complex structures are hard to trade and often lead to changes.
2. If you're unsure about the market situation, stay out.
3. There can never be 100% certainty about market direction. Always use Stop Loss orders for protection.
4. Wave analysis can be combined with other forms of analysis and trading strategies.