In recent weeks, it seemed that the matter had become clear. Now the market expects the first rate cuts from both central banks in June. However, it is evident to me that these expectations may be adjusted more than once. As ECB and FRS members unanimously stated, everything depends and will depend on inflation and the pace of its slowdown. If the slowdown is weak, the regulator may postpone the timing of the first cut to a much later date. Therefore, June is just a guideline.
Both in the European Union and the United States, regular speeches by members of the boards of central banks continue. As I have mentioned before, these often confuse market participants rather than help them. Additionally, one should not dismiss publications of forecasts by major banks. For example, Nordea Bank believes that the first rate cut in the European Union will happen in June, while most regulators believe it's better to start easing policy a little earlier rather than later. However, this "sooner" or "later" does not tell us anything because we do not know the timelines that politicians have in mind. Nordea noted an increase in "dovish" comments from the ECB recently, but they do not indicate readiness for a rate cut before June.
At the same time, the bank's analysts believe that April should not be completely ruled out. If inflation continues to slow down rapidly in the near future, the ECB may decide on an earlier first step. However, new data on inflation and business activity will show everything. In my opinion, slight changes in inflation will not be a reason for ECB managers to sharply change their plans. I believe they have a certain action plan and specific inflation benchmarks that guide their statements. A slight acceleration or deceleration of inflation is unlikely to disrupt their plans. Nevertheless, a large number of "dovish" comments will help the euro move down, as I expect.
EUR/USD Wave Analysis:
The wave analysis of the GBP/USD pair still suggests a decline. Currently, I consider selling the pair with targets below the level of 1.2039 because I believe that wave 3 or c will sooner or later gain momentum. A successful attempt to break the level of 1.2627 became a selling signal. However, at this time, I can also highlight a new sideways trend with the lower boundary at the level of 1.2500. This level is currently the limit for the pound's decline. I can also highlight a descending corridor, which indicates the preferred decline in quotes.
GBP/USD Wave Analysis:
The wave analysis of the GBP/USD pair still suggests a decline. Currently, I consider selling the pair with targets below the level of 1.2039 because wave 2 or b cannot last forever, just like a sideways trend. A successful attempt to break the level of 1.2627 became a selling signal. However, at this time, I can also highlight a new sideways trend with the lower boundary at the level of 1.2500. This level is currently the limit for the pound's decline. Wave 3, or the downward segment of the trend, has not yet begun.
Key Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to play with; they often bring changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There is never 100% certainty in the direction of movement. Do not forget about protective stop-loss orders.
