The U.S. dollar will once again be the "trendsetter" in the upcoming week. More precisely, it will be the trendsetter of movements. In the last two weeks, demand for the U.S. currency has declined, but prior to that, the American currency had been rising in value for nearly two months on rather dubious news foundations. I would like to remind you that the dollar's rise coincided with the entire "shutdown" period in the U.S., which set a new record duration of 43 days. Therefore, the current decline in the American currency is, first, weak and, second, justifiable. However, in the upcoming week, several events in America could turn the market against the upward trend.
The first thing to note is the ISM business activity indices for the services and manufacturing sectors, which will be released on Monday and Wednesday, respectively. These indices typically provoke a reaction from market participants, and one should not judge their actual values based on forecasts. Forecasts often do not match the actual figures exactly. I am also interested in the reports on industrial production and the ADP labor market. I would like to remind you that ADP has been the only report related to the U.S. labor market in recent months. The final Nonfarm Payrolls and unemployment data are expected to be released in December, but it is still unclear when exactly they will become available. Typically, these reports come out on the first Friday of each month.
However, this time, due to shifts stemming from the "shutdown," they may be released later. As of now, no information is available. Therefore, at this point, the market will again have to look only at ADP. It is expected that the increase in jobs in November will amount to 20,000. This is a very weak figure, even lower than the October figure of 42,000. However, high results from the American labor market are not expected at this point. The upcoming week could be unpredictable for movements, as there will be plenty of news, and the fate of payrolls and unemployment rates remains uncertain. I anticipate the continuation of upward wave formations for both instruments.
Wave Analysis of EUR/USD:
Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build an upward section of the trend. In recent months, the market has paused, but the policies of Donald Trump and the Federal Reserve remain significant factors in the decline of the American currency in the future. The targets for the current section of the trend may extend all the way to the 25 level. At this time, the formation of an upward wave set may continue. I expect that, given the current positions, the third wave of this set will continue to form, which could be either (c) or (3). At this moment, I remain in buys with targets around the range of 1.1670 – 1.1720.
Wave Analysis of GBP/USD:
The wave structure of the GBP/USD instrument has changed. We are still dealing with an upward, impulsive section of the trend, but its internal wave structure has become complex. The downward correction structure a-b-c-d-e in (c) at (4) appears to be quite complete. If this is indeed the case, I expect the main section of the trend to resume building with initial targets around the 38 and 40 levels. In the short term, one can expect the formation of wave (3) or (c) with targets around the marks of 1.3280 and 1.3360, which correspond to 76.4% and 61.8% according to Fibonacci.
Key Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are hard to trade because they often trigger changes.
- If there is no confidence in what is happening in the market, it is better not to enter it.
- There can never be 100% certainty in the direction of movement. Don't forget protective Stop Loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
