🌎 EUR/USD: The rally is over, a sharp decline is coming.

The pair is preparing to trade significantly below current levels after confirming fundamental factors.

Now, in order:

technical analysis

All five waves of the bull market are over. The fifth wave closed at 1.1918.

The major uptrend line has been broken. A subsequent retest of this level confirmed the trend change.

Wave A is completed at 1.1468.

Wave B (Correction). A pullback in the trend heralds the next strong downward wave – Wave C.

The price is currently testing the moving average (MA) from below. There are two situations:

Scenario 1: Bouncing off the moving average and then immediately starting to fall.

Scenario 2: A false bullish breakout of the moving averages, followed by a bearish reversal.

In both cases, the result is the same – a drop to a new low.

Why is the euro under pressure?

Macroeconomic data is weak: PMI, retail sales and industrial production point to a loss of economic momentum.

Inflation (2.1%) and core inflation (2.4%) are close to the ECB’s target, but are trending downward rather than upward, creating deflationary risks.

Supply and demand issues: Consumer confidence declines and manufacturers suffer. They all point to a deflationary scenario.

The market is confident that the European Central Bank will not raise interest rates in December.

The Fed’s attractive interest rates remain ahead of the ECB (carry trade).

The U.S. economy has shown relative resilience amid slowdowns in Europe and China.

The Fed needs to borrow more money, and the rollover of large amounts of government debt absorbs liquidity and creates technical support for the dollar.

Alternatively, unexpectedly strong inflation/wage data from the EU could temporarily support the euro and extend the correction period (wave B), but this would only shift the situation to the right and is unlikely to change the overall picture.

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