The European currency declined over the past week; however, it continues to attract demand among market participants overall. Most economists believe that by the end of the year, the euro will surpass the psychological barrier of $ 1.20. I fully agree with this view. In fact, I expect the European currency to trade even higher than 1.22 dollars by year-end. But let's not get ahead of ourselves.

As I have already mentioned in my reviews this week, the euro's decline was, to some extent, an accident. Several factors converged at once: the pound's weakness, a strong U.S. GDP report, Jerome Powell's statements that were not sufficiently dovish, and the market's bearish interpretation of all events combined. However, the charts indicate that the euro did not experience a significant decline. What we are observing is the formation of another corrective wave within the ongoing upward trend structure. Accordingly, everything is proceeding as planned. The pound's wave pattern has been disrupted; the euro's has not.

In the new week, as usual, the U.S. news background will have the greatest impact. This is particularly true because reports on the labor market and unemployment are expected to be released. However, the European news flow should not be ignored either. In particular, attention should be paid to the September inflation reports. Economists expect inflation to rise to 2.3% year-over-year, a significant acceleration already. Recall that Christine Lagarde has repeatedly warned that inflation in Europe may increase in the coming months, but she has not specified how the central bank intends to address elevated inflation.

The ECB has brought its rate level down to a "neutral minimum," which means that if inflation starts to rise, it will suggest that the European Central Bank was premature in easing monetary policy. For the euro, such news would be positive. In addition, Germany will release a substantial set of reports that deserve attention, including retail sales, the unemployment rate, changes in the number of unemployed, inflation, and final September business activity indices. Also noteworthy is Lagarde's upcoming speech, in which she may provide an assessment of the updated inflation data. Therefore, while U.S. news remains the most important driver for the market, European data may also influence the EUR/USD instrument.

EUR/USD Wave Pattern:

Based on my analysis of EUR/USD, I conclude that the instrument continues to build an upward section of the trend. The wave pattern still depends entirely on the news background tied to Trump's decisions, as well as the domestic and foreign policy of the new White House administration. The targets of the current trend section may extend as far as the 1.25 area. At present, the instrument is declining within corrective wave 4, while the overall upward wave structure remains valid. Accordingly, I am considering only long positions in the near term. By year-end, I expect the euro to rise to 1.2245, which corresponds to 200.0% on the Fibonacci scale.

GBP/USD Wave Pattern:

The wave structure of GBP/USD has undergone a change in shape. We are still dealing with an upward impulsive section of the trend, but its internal wave pattern is becoming less readable. If wave 4 assumes a complex three-wave form, the structure will normalize; however, even in this case, wave four will be several times more complicated and extended than wave 2. In my opinion, it is best to work from the 1.3341 level, which corresponds to 127.2% of the Fibonacci. Two failed attempts to break this level may indicate the market's readiness for new buying.

My Core Principles of Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often shift.
2. If there is no confidence in market developments, it is better not to enter.
3. One can never have 100% certainty about market direction. Always use protective Stop Loss orders.
4. Elliott Wave analysis can be combined with other forms of analysis and trading strategies.