08.12.202501:52 Forex Analysis & Reviews: Donald Trump = The End of the Fed

Donald Trump attempted to exert control over the Federal Reserve even during his first term as president. I do not doubt that he appointed Jerome Powell to the position of Fed Chair with some "ulterior motive," aiming to gain control over the central bank. This is precisely what Trump is trying to do now. However, with Powell, it turned out to be a miscalculation. Legally, the president has no influence over the Fed chair; therefore, Powell has operated independently since taking his position. I don't know if there were any arrangements between Powell and Trump before his first appointment eight years ago. This mystery will likely remain unsolved.

However, it can be said with confidence that Powell's steadfastness has preserved the Fed's independence. It's worth noting that in the US, the central bank operates independently from Congress or the president. The Fed chair can be dismissed, but only for serious breaches of duty or law. In simple terms, if the Fed chair does not violate the law and fulfill their duties, they cannot be removed at someone's whim. Thus, Trump had to wait eight years for Powell's term to come to an end.

Currently, Trump is actively seeking a new head for the FOMC. I do not doubt that lessons have been learned from past mistakes, so the new Fed chair will likely be linked to Trump not just through promises but also through other unseen connections that will ensure the White House leader's directives are followed. The markets are confident that Kevin Hassett, currently Trump's economic advisor, will become the new Fed chair. What awaits the Fed in the future?

Michael Burry, the inspiration for the main character in the movie "The Big Short," believes the Fed will cease to exist if Trump gains control of it. Burry is not a fan of the central bank's independence, claiming that the Fed has caused significant damage to the economy over the last century. He stated that the end of the Fed is near, as next year the organization will be ruled by a "Trump guy." In this case, Republicans are likely to be hated, Burry reports, as the investor opposes further monetary easing. In his view, there are no grounds for lowering rates, as inflation in America is accelerating. He also believes that the Treasury Department could perform the functions of the central bank, as both agencies are "practically one and the same."

I'm not sure about the complete liquidation of the Fed and the transfer of its powers to another agency, but I think Trump will establish control over the central bank in 2026. In this case, interest rates will be reduced to minimal values, leading to further declines for the dollar.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument continues to build an upward section of the trend. The market has paused in recent months, but Donald Trump's policies and the Fed's actions remain significant factors in the US dollar's future decline. The targets for the current section of the trend could reach the 25 figure. However, the last upward segment has once again taken on a corrective appearance, indicating that a downward wave may be beginning within this segment, with a maximum leading to a new downward corrective set of waves.

Wave Picture for GBP/USD:

The wave picture for GBP/USD has transformed. We continue to deal with an upward impulse section of the trend, but its internal wave structure has become complex. The downward corrective structure a-b-c-d-e in C of 4 appears quite complete. If this is indeed the case, I expect the main trend section to resume its build with initial targets around the 38 and 40 figures. However, wave 4 may also adopt a five-wave appearance.

In the short term, I anticipated the formation of wave 3 or c with targets around 1.3280 and 1.3360, corresponding to the 76.4% and 61.8% Fibonacci levels. These targets have been reached. Wave 3 or C may continue its build, but the current wave set is likely corrective again. Therefore, a decline at the beginning of next week is also possible, and the attempt to break the 1.3360 mark has been unsuccessful.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often lead to changes.
2. If there is uncertainty in what's happening in the market, it is better not to enter.
3. There can never be 100% certainty about the direction of movement. Always remember to use protective stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.