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21.04.2025 01:01 AM
US Dollar: Weekly Preview

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Is there light at the end of the tunnel? The US dollar will again try to answer that question in the new week. To briefly recap: over the past two months, there has also been no shortage of positive news for the dollar. Take, for example, the hawkish stance of the Federal Reserve, which refuses to cut rates to accommodate Trump and his new trade policy. The Fed may not lower rates throughout 2025, as it expects inflation to rise. At the beginning of the year, markets anticipated at least two rounds of monetary easing. Thus, once again, the market's expectations have missed the mark—just like in 2024. This factor alone should be enough to support demand for the US currency occasionally. But that's not happening because the market is focused solely on Trump, and everything else comes second.

There won't be any particularly interesting reports or events in the US either. Markets will receive updates on business activity in the services and manufacturing sectors, new home sales, durable goods orders, existing home sales, and consumer sentiment. However, no matter how positive, none of these reports are likely to change the prevailing bearish sentiment toward the dollar. As a result, Donald Trump—his statements and decisions—will once again dominate all instruments.

Let me remind you that this week, Trump hinted that tariffs on China could be raised even further, and he also announced potential tariffs on semiconductors. At the same time, he stated that negotiations are underway with the European Union on a trade agreement. Talks are also in progress with China and many other countries. I can't say how reliable this information is, but if it's true, that's the light at the end of the tunnel the dollar has been waiting for. The more news about negotiations we see, the easier it will be for the dollar to stabilize.

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Wave analysis of EUR/USD

Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build a new upward trend section. Donald Trump's actions have reversed the previous downward trend. Therefore, the wave pattern will soon entirely depend on the position and decisions of the US president. This must constantly be kept in mind. Judging from the wave structure alone, I previously expected a three-wave correction in wave 2. However, wave 2 has already ended and took a single-wave form. Thus, the formation of wave 3 of the upward trend section has begun. Its targets could extend up to the 1.2500 level, but achieving them will depend solely on Trump.

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Wave analysis of GBP/USD

The wave structure of GBP/USD has changed. We are now dealing with a bullish, impulsive trend segment. Unfortunately, under Donald Trump, the markets may experience numerous shocks and reversals that do not conform to wave patterns or technical analysis. The presumed wave 2 is now complete, as quotes have surpassed the peak of wave 1. Therefore, we can expect the formation of an ascending wave 3, with the next targets at 1.3345 and 1.3541—assuming that Trump's stance on trade policy doesn't make a 180-degree turn, for which there is no indication.

Core principles of my analysis:
  1. Wave structures should be simple and understandable. Complex patterns are difficult to trade and often prone to change.
  2. If you're unsure about what's happening in the market, it's better to stay out.
  3. There is never 100% certainty about market direction. Always use protective Stop Loss orders.
  4. Wave analysis can be combined with other forms of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
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