Practically all participants in the currency market watched the Federal Reserve meeting on Wednesday evening. However, the market mainly focused on the FOMC's interest rate decision, the "dot plot" graph, and Jerome Powell's speech. In doing so, it completely overlooked another event that was perhaps less significant but still interesting. On Wednesday evening, the FOMC committee decided to reappoint all 11 presidents of the Federal Reserve Banks for a second term. What could be so important about this event? Quite a lot.
Recall that in 2025, a full-blown war broke out between the Fed and Donald Trump. The President desperately demands a reduction in interest rates to levels that will actively stimulate US economic growth. Trump needs economic growth for three reasons. First, he promised American voters a "revival of America." Second, the trade war and other controversial decisions made by Trump have hit and will continue to hit the US economy, and the decline needs to be mitigated by low rates that accelerate recovery. Third, due to rising inflation, increases in various payments, and cuts to numerous social and medical programs, vulnerable segments of the US population have become even less protected. Treasury Secretary Scott Bessent, along with Trump, urged Americans not to despair, as rising prices "will not be noticeable" – incomes will rise faster, and the US economy will grow at unprecedented rates. But how will the economy grow if it is regularly struck down and lacks stimulation?
For this reason, the Republican leader continues to battle the Fed and demand that monetary policy be eased. Meanwhile, the Fed, still led by Jerome Powell, made a "knight move" by reappointing all 11 heads of the Federal Reserve Banks for another five years. It is noteworthy that the presidents of the Federal Reserve Banks are among the most hawkish members of the FOMC committee. Therefore, Trump could have tried to block their reappointment. Dismissing an employee without valid reasons is one thing; failing to approve a contract extension after their term expires is another. The second option is much easier to implement, and many economists believe Trump would have taken this opportunity with 100% likelihood. However, the Fed decided to play it safe, and Trump will need to find reasons to dismiss one or another governor again if he still wants to change the FOMC's views on monetary policy.
Wave Picture for EUR/USD:
Based on the analysis of EUR/USD, I conclude that the instrument continues to build an upward trend segment. Trump's policies and the Fed's monetary policy remain significant factors for the long-term decline of the US dollar. The targets of the current trend segment may stretch up to the 25th figure. The current upward wave formation is beginning to gain traction, and I hope we are witnessing the formation of an impulse wave structure within global wave 5. Thus, we should expect growth to continue right up to the 25th figure, as I mentioned earlier.
Wave Picture for GBP/USD:
The wave picture for the GBP/USD instrument has changed. We continue to deal with an upward impulse trend segment, but its internal wave structure has become complex. The downward correction structure a-b-c-d-e in C of 4 shows a completed look, as does the entire wave 4. If this is indeed the case, I expect the main trend segment to resume its construction with initial targets around the 38th and 40th figures.
In the short term, I expected wave 3 or c to form, with targets around 1.3280 and 1.3360, which correspond to the 76.4% and 61.8% Fibonacci levels. These targets have been reached. Wave 3 or c continues its formation, and the current wave set is beginning to take on an impulsive appearance. Therefore, one can expect continued price increases with targets around 1.3580 and 1.3630.
Key Principles of My Analysis:
- Wave structures should be simple and understandable. Complex structures are difficult to trade and often involve changes.
- If there is uncertainty about what is happening in the market, it is better not to enter.
- There can never be 100% certainty in the direction of movement. Always remember to use protective stop-loss orders.
- Wave analysis can be combined with other types of analysis and trading strategies.
