29.07.202500:45 Forex Analysis & Reviews: EU–US Trade Deal. Part 1

Four days before August 1 — the final deadline for the negotiations — the European Union and the United States announced the signing of a trade agreement. This deal has been heavily criticized in Europe, and I can understand why. Essentially, it is not a valid agreement but rather a list of commitments by the EU in favor of the U.S., in exchange for avoiding a 30% tariff on all European imports. In this review, we will examine in detail why this agreement is a failure for the EU and why the dollar is unlikely to benefit from it in the long run.

First, let's list the main terms of the deal. The European Union agrees to invest $600 billion in the U.S. economy, purchase $750 billion worth of U.S. energy over several years, and accept 15% tariffs on all goods. Notably, cars will now be subject to a 15% tariff, down from the previously applied 25%, which is particularly important for the EU. However, aluminum and steel will still be subject to "sectoral rates." It's also worth noting that starting August 1, Trump had planned to raise tariffs on imports of copper and pharmaceuticals. It is currently unclear how these categories will be treated in the EU.

The first question that comes to mind is: what happens in a few years? The EU will have spent 600 billion on the U.S. economy and 750 billion on U.S. energy. Once it has spent nearly $1.5 trillion, will Trump launch a new trade war? And will this cycle repeat endlessly? If so, congratulations to Europe — it has become the "cash cow" of the White House. Perhaps that sounds a bit harsh, but it's difficult to put it any other way.

It's no surprise that the euro collapsed on Monday — the government of Ursula von der Leyen has never signed such a disastrous deal. Von der Leyen herself, on the other hand, announced a "historic agreement," though to her credit, she refrained from claiming it was beneficial for Europe — because the benefit is highly questionable. However, Von der Leyen practically reenacted Trump himself, deciding on the deal almost unilaterally. At the very least, she immediately faced harsh criticism across the EU.

Wave Analysis of EUR/USD:

Based on the conducted analysis, I conclude that EUR/USD is continuing to build a bullish trend segment. The wave structure remains entirely dependent on the news background, particularly decisions by Trump and U.S. foreign policy. The targets of this trend segment could reach as far as the 1.25 area. Accordingly, I continue to consider buying positions with targets around 1.1875, which corresponds to a 161.8% Fibonacci, and possibly higher. A failed attempt to break through the 1.1572 level (corresponding to 100.0% Fibonacci) suggests that the market is poised for new buying, although the presumed Wave 4 appears to be unfolding in a three-wave structure.

Wave Analysis of GBP/USD:

The wave pattern for GBP/USD remains unchanged. We are dealing with an upward, impulsive trend segment. Under Donald Trump, markets may face many more shocks and reversals that could significantly impact the wave structure. However, the current working scenario remains intact. The targets for the bullish trend segment are now located around 1.4017, which corresponds to 261.8% Fibonacci from the assumed global Wave 2. The market is currently building a corrective set of waves as part of Wave 4, which classically consists of three waves.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often lead to changes.
2. If you're uncertain about the market, it's better to stay out.
3. Absolute certainty in the direction of movement is never possible. Don't forget to use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.