FX.co ★ Chances of Rate Cuts in December Are Increasing Again. Part 2

The prospect of a new round of monetary policy easing is supported not only by the FedWatch tool, economic data, and global events but also by the Federal Open Market Committee (FOMC) members themselves. It is no secret that at least three members of the FOMC are ready to support a rate cut at every meeting. These three are Christopher Waller, Michelle Bowman, and Stephen Miran. Each of them, to some extent, is a "protege" of Trump. However, at least one more member has joined them, who believes that the rate should be lowered.

This is John Williams, the president of the New York Federal Reserve Bank. He stated that he was not impressed by the September payroll data and that the unemployment rate had returned to pre-pandemic levels. So, is the unemployment rate more important to the Fed than Nonfarm Payrolls? It is worth noting that the Nonfarm Payroll report only indicates the number of new jobs created. It does not account for layoffs. You could say that payrolls are 50% of the state of the labor market. A million new jobs might be created, but if at the same time 1.5 million Americans lost their jobs, it's hard to speak of a positive trend.

Therefore, the Nonfarm Payrolls figure may recover, but that alone is not enough to stop the unemployment rate from rising. Williams also noted that the Fed could afford to lower the rate at the upcoming meeting without the threat of renewed inflation acceleration. According to him, tariffs will "pass through the economy" and will eventually stop stimulating price growth. In other words, Williams believes that the inflation rising due to trade tariffs is a temporary phenomenon, not a permanent one. It's difficult to say whether this is true, but for the last five months, the consumer price index has been slowly gaining momentum.

As a result, we are approaching the last Fed meeting of the current year with at least four "doves." Most likely, their efforts will not be enough for another policy easing, but the final decision will depend on the data published in early December. The unemployment rate may continue to rise, while inflation, on the contrary, will slow down. In that case, the outcome of the FOMC meeting will be predetermined.

Wave Analysis for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument continues to build an upward trend. The market has paused in recent months, but the policies of Donald Trump and the Federal Reserve remain significant factors in the US currency's future decline. The targets for the current trend segment may reach the 25-figure mark. Currently, wave formation in the upward series may continue. I expect that, from current positions, the third wave of this series will begin, which could be wave 3 or a different cycle. In the coming days, I am considering buying with targets near the 1.1740 mark, and an upward reversal of the MACD indicator will confirm this signal.

Wave Analysis for GBP/USD:

The wave structure of the GBP/USD instrument has changed. We continue to deal with an upward, impulsive trend segment, but its internal wave structure has become complex. The downward correction structure a-b-c-d-e in a wave 4 appears to be quite complete. If this is indeed the case, I expect the main trend segment to resume construction, with initial targets around the 38 and 40 levels. In the short term, one can expect the formation of wave 3 or an "impulse" with targets located around the 1.3280 and 1.3360 marks, which correspond to 76.4% and 61.8% Fibonacci retracements.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play back, and they often lead to changes.
2. If there is no confidence in market movements, it is better not to enter.
3. There is never 100% certainty in the direction of movement. Always remember to use protective stop-loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.