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What will change with the arrival of a new Federal Reserve Chair? This is a rather important question, and the answer to it may already have implications for the U.S. dollar and the economy. It's no secret that Donald Trump wants to have a compliant Fed Chair to influence the central bank's decisions. Trump wants to have complete control over the country and make key decisions independently. He doesn't need Congress, the Senate, or the Fed. He believes he knows better than anyone else what needs to be done.
However, such a model of governance is impossible in America. That could be a good thing. Maybe not. It's not for me to judge. During the first five months of his second term, Trump has already managed to bypass the Constitution multiple times and neglected to seek Congressional approval. He has been sued several times, and now the Democrats are once again initiating the impeachment process. But what does it matter anymore if the key decisions have already been made?
Let me remind you that, according to U.S. law, the president does not have the authority to impose global trade tariffs on entire countries. He may impose them on specific product groups (if required for national interests), yes, but not on entire nations. Additionally, under U.S. law, the president is prohibited from using the military to suppress protests or demonstrations. And he cannot unilaterally decide to launch military strikes against other nations. Nevertheless, Trump has made such decisions, and legal proceedings in the U.S. can drag on for years. So, by the time a court rules that Trump's actions were unconstitutional, he may already be retired.
The Federal Reserve is the only institution that does not report to Trump. However, it's worth noting that it was Trump who nominated Jerome Powell as Fed Chair during his first term. Even back then, Trump wanted a "lapdog" heading the central bank, but Powell went off-script. Legally, Trump has no right to replace the Fed Chair. So here's the question: what guarantees are there that the next Fed Chair chosen by Trump will be more loyal? Another question arises: if the 12-member FOMC makes all decisions, why does Trump believe that his "puppet Chair" will be able to make decisions independently?
Based on the analysis of EUR/USD, I conclude that the instrument continues to form an upward trend segment. The wave layout still largely depends on the news background related to Trump's decisions and U.S. foreign policy, and there have been no positive developments. The targets for wave 3 could extend to the 1.25 level. Therefore, I continue to consider buying, with initial targets around 1.1708, which corresponds to 127.2% Fibonacci retracement. A de-escalation of the trade war could reverse the upward trend, but currently, there are no signs of a reversal or de-escalation.
The wave pattern for GBP/USD remains unchanged. We are dealing with an upward, impulsive trend segment. Under Trump, the markets may face many more shocks and reversals, which could significantly affect the wave pattern, but for now, the working scenario remains intact. Trump continues to do everything to reduce demand for the dollar. The targets for the ascending wave 3 lie around the 1.3708 mark, corresponding to 200.0% Fibonacci of the presumed global wave 2. Therefore, I continue to consider buying, as the market shows no intention of reversing the trend.
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