EUR/USD Analysis: Downward Wave Structure Nears Completion

The EUR/USD pair remains within a global corrective downward trend segment structured as A-B-C-D-E on the higher timeframe. This five-wave pattern appears fully developed and may be nearing completion. Once finalized, the technical structure favors the initiation of a new upward impulse segment, with long-term targets positioned well above the 20.00 level and initial projections targeting the 17.00–18.00 range.

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On the lower timeframe, price action continues to unfold in an impulsive wave sequence belonging to wave E of the higher timeframe pattern. Indications suggest wave 5 of E is either complete or close to completion. Although EUR/USD declined by 65 basis points on Friday, the overall wave analysis signals that the broader US dollar rally is approaching its end.

Fundamental catalysts have recently failed to sustain upside momentum for the euro. Despite positive drivers such as the Eurozone inflation report and the outcomes of the US Congressional elections, euro gains were quickly offset by rapid intraday selling. Nevertheless, with much of the positive US news already priced into the market, fewer factors remain to drive sustained dollar strength.

Technical Outlook and Key Levels

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A key technical marker is the failed attempt to break above 1.1126, corresponding to the 50.0% Fibonacci retracement level on the higher timeframe. This failure, alongside the completed five-wave internal structure of wave E, suggests the market may be preparing for a bullish reversal. To confirm this scenario, the European currency must hold above its recent lows while news sentiment stabilizes.

Geopolitical developments remain a key risk factor for the pair. Any sharp escalation in Middle East conflicts could spark renewed safe-haven demand for the US dollar. However, given that the greenback has already experienced a two-month rally, further sustained dollar appreciation may be limited unless external shocks intensify significantly.

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