EUR/USD Technical Analysis: Bearish Correction and Growth Risks

Technical Outlook for EUR/USD

The 4-hour chart for EUR/USD indicates a shift toward a corrective structure within the broader upward trend that began in January of last year. While the long-term bullish trend remains technically intact, the current wave formation suggests a potential decline, with the possibility of wave C extending below the lows of wave A. Market participants are monitoring whether geopolitical volatility can sustain such a significant downward reversal.

Wave Analysis and Potential Targets

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On the lower timeframe, the market appears to be forming a downward-trending impulse following the completion of a three-wave upward corrective structure. If this analysis holds, the pair may develop a five-wave structure for wave C with a potential target below the 1.1400 level. However, given the ongoing instability in geopolitical negotiations, market sentiment remains susceptible to frequent shifts, which could limit the depth of this decline.

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Market Reaction to Geopolitical and Economic Data

The EUR/USD pair has faced downward pressure, with recent sessions erasing previous optimism stemming from U.S.-Iran diplomatic developments. Downward momentum, currently identified as wave 3 or c, shows a well-defined structure that could find support near the 1.1578 level, which aligns with the 61.8% Fibonacci retracement.

Eurozone Economic Slowdown

The latest Eurozone PMI data shows a cooling economy, with services falling to 46.4 from 47.6 and manufacturing dropping to 51.4 from 52.2. These leading indicators suggest a potential slowdown in economic growth, placing the European Central Bank in a difficult position regarding interest rate policy. If growth concerns persist, the ECB may face challenges similar to the Federal Reserve in managing the risks of potential stagflation.

Conclusion and Strategic Outlook

The pair continues to trade within a corrective structure that follows a long-term upward trend. While the current wave formation suggests a path toward the 1.1352 level—corresponding to the 38.2% Fibonacci retracement—the long-term outlook remains contingent on the completion of the current A-B-C structure. Traders are advised to maintain strict risk management via stop-loss orders, as wave analysis should be integrated with broader market observations to confirm potential reversals.

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