18.08.202500:45 Forex-elemzések és áttekintések: Bank of America Expects Further Weakness in the Dollar

In my reviews, I constantly emphasize that the news background remains highly toxic to the U.S. currency. I will not list all the factors behind the dollar's decline once again, but I will note that I am not the only one who thinks this way. Many analysts and economists share my view, including those at Bank of America.

The bank's experts believe that the dollar will soon face a very unfavorable combination of rising inflation and falling interest rates. The last time such a scenario occurred was in 2007–2008, when monetary policy easing coincided with rising inflation due to disruptions in the supply of goods and energy resources. At that time, the FOMC was cutting rates because the U.S. housing and labor markets had begun to "cool down."

Economists also expect inflation in the U.S. to continue rising. First, Donald Trump's tariffs will keep driving prices higher. Second, the rate cut itself will stimulate further inflationary growth. However, the Federal Reserve's top priority is now to support the labor market, while Trump will, in any case, continue to raise tariffs and introduce new ones, making the rise in the consumer price index almost inevitable.

Based on this, Bank of America considers it reasonable to buy the euro and the pound. The bank's economists forecast that EUR/USD will reach 1.20 by the end of the year. In my view, this is a very realistic target. Once it is reached, the dollar's outlook may improve. Of course, everything will continue to depend on Trump's policies, and he still has at least 3.5 years left in office. However, around the 1.20 level, the formation of global upward wave 3 may come to an end. Consequently, the pair will move into building wave 4, which implies a correction lasting several months. It is unlikely that within these few months the dollar will significantly improve its position, but in the current situation, any growth would already be something.

Wave pattern for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument continues forming an upward segment of the trend. The wave structure still entirely depends on the news background connected with Trump's decisions and U.S. foreign policy. The targets for this trend segment may extend as far as the 25th figure. Therefore, I continue to consider buying with targets around 1.1875, which corresponds to 161.8% Fibonacci, and above. I assume that the construction of wave 4 has been completed. Accordingly, now is a good time to buy.

Wave pattern for GBP/USD:

The wave structure of GBP/USD remains unchanged. We are dealing with an upward, impulsive trend segment. Under Trump, the markets may still face a large number of shocks and reversals, which could significantly affect the wave structure, but at present, the working scenario remains intact. The targets of the upward trend segment are now located near 1.4017. At the moment, I assume that the formation of downward wave 4 has been completed. Therefore, I recommend buying with a target of 1.4017.

The main principles of my analysis:

1. Wave structures must be simple and clear. Complex structures are difficult to trade and often change.
2. If there is no confidence in what is happening in the market, it is better to stay out.
3. One can never be 100% certain about the direction of movement. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.