Donald Trump and Jerome Powell held a meeting at the White House last week. This news went largely unnoticed due to the scant details provided. Only general information about the meeting surfaced. It became known that the Federal Reserve Chair once again informed the U.S. President that the central bank's decisions would be based solely on incoming economic data. It was reported that Powell did not provide any forecasts regarding interest rates but stated that the consequences of the new U.S. tariff policies would play a decisive role in determining the parameters of monetary policy.
Additionally, the FOMC Chair emphasized that the entire Committee would adhere to U.S. laws governing the activities of the organization that acts as the central bank. He reminded Trump that the Fed's primary goals are to ensure full employment and price stability. We have heard all of this from Powell before, which is why the news drew little attention.
However, Powell remains steadfast. He is not intimidated by Trump, his potential future, or the current pressure on the Fed. Based on this, I can assume that rates will not be lowered at the upcoming meetings. If this information had any significant value for the market, demand for the U.S. dollar might have risen sharply. However, market participants have been ignoring the Fed's "hawkish" policy and the "dovish" stances of the European Central Bank and Bank of England for quite some time.
Thus, Powell once again did everything he could for the dollar (albeit unintentionally), but even that did not help. The market continues to focus solely on Trump's Global Trade War, and in the past week alone, several signals indicate its escalation. Therefore, if the U.S. currency barely holds its current positions now, it is unlikely to last long.
Both instruments continue to build upward waves, which are fully consistent with the current wave layout. Based on its internal structure and the unchanged nature of Trump's policies, the U.S. currency could continue to weaken for an extended period.
Wave Analysis for EUR/USD:
Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build an upward trend segment. In the near term, the wave structure will depend entirely on news related to Trump's decisions and U.S. foreign policy. Wave 3 of the upward trend has begun to form, with potential targets extending into the 1.25 area. Therefore, I am considering long positions targeting levels above 1.1572, corresponding to the 423.6% Fibonacci level. It's important to remember that a de-escalation of the trade war could reverse the uptrend, but currently, there are no signs of a reversal or de-escalation.
Wave Analysis for GBP/USD:
The wave structure for GBP/USD has evolved. Now, we are dealing with an upward impulsive trend segment. Unfortunately, under Trump, markets may face numerous shocks and reversals that defy wave patterns and technical analysis, but the current scenario and structure remain intact for now. The formation of wave 3 continues, with near-term targets at 1.3541 and 1.3714. Therefore, I continue to consider long positions as the market shows no signs of wanting to reverse the trend yet.
Main Principles of My Analysis:
- Wave structures should be simple and clear. Complex structures are difficult to trade and often carry uncertainties.
- If there is no confidence in the market situation, it is better not to enter it.
- Absolute certainty in the direction of movement is impossible. Always use protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
