13.05.202518:35 Forex Analysis & Reviews: EUR/USD Analysis on May 13, 2025

The wave structure on the 4-hour chart for EUR/USD has transformed into a bullish pattern and remains such. There is little doubt that this shift was triggered exclusively by the new U.S. trade policy. Prior to February 28, when the sharp depreciation of the dollar began, the entire wave structure reflected a convincing downward trend, forming a corrective wave 2. However, weekly announcements from Donald Trump about the imposition of various tariffs took their toll. Demand for the U.S. dollar started to plummet, and the entire trend section originating on January 13 took on an impulsive upward form.

In fact, the market failed to build a convincing wave 2 within this new bullish trend. Only a minor pullback followed, which was smaller than the corrective waves within wave 1. Nevertheless, the dollar could continue to weaken unless Trump reverses his trade policy course. And Monday's events have shown that he might indeed do so.

The EUR/USD pair fell by 160 basis points on Monday, setting a record for dollar strength in recent months. Demand for the dollar surged sharply after news broke about a 115% reduction in tariffs between the U.S. and China—an outcome of consultations held in Geneva. The parties agreed not to destroy trade between the two nations and to begin at least 90 days of negotiations to reach a more stable agreement that addresses all outstanding issues.

It appears, however, that the questions mainly come from Washington—and seemingly from Trump himself. Negotiations will likely be focused on satisfying the current U.S. president. Trump, I believe, genuinely wants a trade deal because he understands that without China, the U.S. economy could suffer severely, and American consumers will not welcome a doubling in prices for Chinese goods (which have long been considered cheap). Thus, while Trump is interested in a deal, he continues to act as though he isn't.

Overall, the past month has seen a "tariff thaw," and this would not have been possible without Trump's willingness to negotiate. First, he introduced a 90-day grace period for all countries except China, then extended the same period to Beijing. This clearly shows Trump's desire to strike a deal on his own terms—to reboot the economy, demonstrate his presidential prowess, and perhaps inspire grand tributes akin to the Great Pyramid of Giza or the Taj Mahal.

Conclusion

Based on the analysis of EUR/USD, the pair continues to build out a bullish wave trend. In the near term, the wave structure will fully depend on the position and actions of the U.S. president. This should always be kept in mind. Wave 3 of the bullish segment has begun, and its targets may reach the 1.25 level. Hitting these targets will depend solely on Trump's policies. At this point, wave 2 within wave 3 appears to be nearing completion. Therefore, I am considering long positions with targets above 1.1572, which corresponds to the 423.6% Fibonacci extension. However, Trump could easily reverse the bullish trend with a single decision.

On the higher wave scale, the structure has also shifted to a bullish format. A long-term upward wave sequence is likely in store—but Trump's news flow could still turn everything upside down again.

My Core Principles of Wave Analysis:

1. Simplicity and Clarity: Wave structures should be simple and easily interpretable. Complex formations are harder to trade and often lead to revisions.
2. Avoid Uncertainty: If there's no confidence in what's happening in the market, it's better to stay out.
3. Use Protective Orders: Absolute certainty in price direction is never possible. Always use Stop-Loss orders.
4. Combine Tools: Wave analysis can and should be combined with other types of analysis and trading strategies.