EUR/USD Technical Analysis: Euro Approaches Key Decision Point

The wave count on the four-hour EUR/USD chart has grown increasingly complex as the pair approaches a critical decision point. On the higher timeframe, the primary downward trend segment has formed an A-B-C-D-E five-wave structure. Because all internal waves are approximately equal in size, this corrective movement appears structurally complete and hints at a potential bullish reversal.

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On the lower timeframe, an impulsive wave sequence continues to develop, potentially representing wave E of the higher timeframe. The current wave structure indicates that the broader downward sequence is nearing exhaustion across both charts. Although shifting market sentiment and recent news events have favored the US dollar, fundamental catalysts for further greenback appreciation are becoming scarce.

Market Sentiment and Federal Reserve Focus

Ahead of the upcoming Federal Reserve meeting, the euro remains in an undeniably weak position near extreme levels. The market continues to price news developments in favor of the safe-haven US dollar, driving the euro lower primarily through sustained momentum. The pair's next directional move will heavily depend on upcoming statements from the Federal Reserve and Kevin Warsh.

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From a fundamental perspective, market participants appear to have already priced in aggressive policy tightening, including a potential December rate hike and future adjustments. Because the market has largely anticipated these scenarios, the scope for further EUR/USD downside driven by rate expectations is diminishing. Consequently, the ongoing downward wave sequence faces limited justification for extended losses.

Technical Outlook and Trading Levels

Analysis of the global corrective trend structure suggests that the current pattern may be fully developed. The unsuccessful attempt to break below the 1.1126 support level—which corresponds to the 50.0% Fibonacci retracement on the higher timeframe—signals that the market may be priming for renewed buying interest. These technical factors present a favorable environment to anticipate the initiation of a new upward trend segment.

If the current impulsive pattern concludes as projected, the EUR/USD pair is expected to transition into a prolonged bullish phase. Higher timeframe targets indicate a potential recovery toward the 1.1700 to 1.1800 resistance region, with longer-term potential extending well above the 1.2000 handle. Traders are advised to incorporate strict risk management and protective stop-loss orders given inherent market uncertainties.

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