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The wave pattern on the 4-hour EUR/USD chart has shifted into a bullish formation. It's safe to say that this transformation occurred solely due to the new U.S. trade policy. Until February 28, when a sharp decline in the dollar began, the entire wave pattern resembled a solid bearish trend segment. A corrective wave 2 was in progress. However, weekly announcements from Donald Trump about various new tariffs did their part. Demand for the U.S. dollar plummeted, and the entire trend segment, which began on January 13, has now taken on a five-wave impulse structure.
Moreover, the market couldn't even form a convincing wave 2 within the new upward trend. We saw only a shallow pullback—smaller than the corrective waves within wave 1. However, the U.S. dollar may continue to decline unless Donald Trump completely reverses his current trade policy. We've already seen one instance where a change in news flow altered the wave structure. A second occurrence is entirely possible.
EUR/USD showed almost no movement on Friday. The week started off strong—with a 170-point surge before the U.S. session even began. Then on Tuesday, the pair made a similar move, but in the opposite direction. On Wednesday, Thursday, and Friday, it hovered in the same area as it did prior to Tuesday's swing. Is this a fair development? Unlikely.
Last weekend, Donald Trump publicly expressed his desire to fire Jerome Powell for refusing to cut interest rates. This news (presumably) caused the dollar to drop on Monday. But it raises an important question: why did the market react to yet another(!) critical remark from Trump toward Powell? Trump has wanted Powell gone for nearly eight years. Over that time—excluding a four-year break—we've heard the same thing: rates should be lower, and Powell refuses to follow or support White House policy under Trump. So nothing new was actually said last weekend. Trump has been reiterating Powell's "slowness" for months now.
Similarly strange was Tuesday's decline in EUR/USD, when Trump announced he no longer intended to fire Powell and even called him "a good guy." On Thursday, the U.S. published a strong report on durable goods orders—but the market showed no interest in buying the dollar. Then on Friday, with no news releases, there were no movements either. As we can see, the market responded this week in a very erratic and selective way. The wave pattern, as a result, did not improve in clarity or appearance.
Based on the current analysis of EUR/USD, I conclude that the pair continues to build a new bullish trend segment. Trump's actions reversed the previous bearish trend. Therefore, moving forward, the wave structure will depend entirely on the stance and actions of the U.S. president. This must be kept in mind at all times.
Based solely on wave structure, I had anticipated a three-wave correction within wave 2. However, wave 2 is already complete and turned out to be a single wave. Thus, wave 3 of the bullish trend has begun, with potential targets extending to the 1.25 area. Whether or not those targets are reached depends entirely on Trump, and the internal structure of this wave is already forming rather awkwardly.
On the higher time frame, the wave pattern has also shifted bullish. We're likely looking at a long-term upward wave sequence—but once again, Trump's news flow could turn everything upside down at any moment.
Core Principles of My Analysis:
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