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The wave structure on the 4-hour chart for the EUR/USD pair has transformed into an upward one and continues to hold this formation. I believe there is little doubt that this transformation occurred solely due to the new U.S. trade policy. Until February 28—when the sharp decline in the U.S. dollar began—the entire wave structure appeared to be a convincing downward trend segment. Wave 2 was forming as a correction. However, Trump's weekly announcements about the imposition of various tariffs did their job. Demand for the U.S. dollar began to plummet, and now the entire trend segment, which began on January 13, has taken on an impulsive upward shape.
In fact, the market didn't even manage to build a convincing wave 2 within this trend segment. We only saw a slight pullback, which was smaller than any of the corrective waves within wave 1. However, the U.S. dollar may continue to decline—unless Donald Trump suddenly reverses his trade policy, which he has shown he's capable of doing (as proven on Monday).
The EUR/USD exchange rate barely moved over Thursday and Friday. I would note that there was a fair amount of economic data released over these days both in the Eurozone and in the U.S. Reports on industrial production and GDP were published in Europe; in the U.S., data on retail sales, producer prices, building permits, and even a speech by Jerome Powell were released. However, all this information was either neutral or ignored by the market. I tend to believe the latter.
I agree with most analysts who believe that the instrument's current dynamics depend entirely on the dollar—and the dollar's performance, in turn, depends on Donald Trump. The market reacts particularly strongly to news related to the trade war or Trump's relationship with Powell. Recall that the most recent sharp drop in the dollar was caused by Trump's statement about wanting to fire Powell. Although, as usual, Trump changed his mind the next day—or rather realized he never had the authority to do so, just as he didn't eight years ago. Trump likes making statements that can be twisted in any direction later. For example, who can disprove Trump's promises of a "great future for the U.S."? Or how can one refute his claim that "there would never have been a war between Ukraine and Russia under his leadership"?
When it comes to Powell, it's not feasible to keep talking about firing him—since the world is well aware that the Fed operates independently of both Congress and the President of the United States.
Based on the EUR/USD analysis, I conclude that the instrument continues to build an upward trend segment. In the near term, the wave structure will depend entirely on the position and actions of the U.S. president. This should always be kept in mind. Wave 3 of the upward trend is underway, and its targets could extend up to the 1.25 level. Achieving these targets will depend solely on Trump's policies. At this point, wave 2 within wave 3 can be considered either completed or nearly so. Therefore, I am considering buying positions with targets above the 1.1572 level, which corresponds to 423.6% Fibonacci. It's important to remember that de-escalation in the trade war could reverse the upward trend.
On the higher wave scale, the wave structure has also shifted to an upward trend. A long-term bullish wave sequence is likely, but Trump's news flow still has the power to flip the situation on its head once again.
Key Principles of My Analysis:
Díky analytickým přehledům společnosti InstaForex získáte plné povědomi o tržních trendech! Jako zákazníkovi společnosti InstaForex je Vám k dispozici velký počet bezplatných služeb umožňujících efektivní obchodování.
