The wave structure on the 4-hour chart for EUR/USD has remained unchanged for several months, which is very encouraging. Even when corrective waves form, the integrity of the structure is preserved. This allows for accurate forecasts. Let me remind you that wave labeling does not always look like in the textbooks. At the moment, it still looks very good.

The construction of an upward trend segment continues, while the news background continues to mostly support not the dollar. The trade war launched by Donald Trump goes on. The confrontation with the Fed persists. The market's "dovish" expectations regarding Fed rates are growing. The market rates Trump's results over the first 6–7 months very poorly, even though economic growth in the second quarter reached 3%.

Currently, it can be assumed that the construction of impulse wave 5 continues, with potential targets extending as far as the 1.25 level. Within this wave, the internal structure is rather complex and ambiguous, but its larger scale leaves little doubt. At present, three upward waves can be seen, meaning that at the end of last week the instrument moved into the formation of wave 4 within 5, which may take a three-wave form.

On Wednesday, EUR/USD resumed its decline. The euro's losses already amount to around 65 basis points, even though today's news background is virtually zero. And yet the market is actively selling the instrument. Why? The obvious reason is Jerome Powell's speech yesterday evening. We will discuss it in detail in a separate article, but for now I want to point out once again a pattern that has been repeating for a year and a half, if not longer.

What could explain the strengthening of the dollar if the Fed intends to continue easing monetary policy? Only the fact that the market expected much more easing and had already priced it in. If this assumption is correct, then I can only say one thing: the market keeps stepping on the same rake as last year. Recall that last year traders expected to see 6–7 rounds of easing but ended up with only 3. This year, 4 rounds were expected, but so far only one has occurred.

In both cases, the forecasts were made by the market itself, not by the Fed. For example, at the beginning of the current year, according to the "dot plot," two rounds of easing were "planned." And Jerome Powell indirectly confirmed yesterday that this scenario remains highly likely. The FOMC continues to worry about rising inflation, so it is not ready to cut rates headlong. The labor market has indeed shown weak results over the last four months, making easing necessary. But the greater the easing, the higher inflation will rise. Therefore, the base scenario remains unchanged – two rate cuts in 2025.

General conclusions

Based on the EUR/USD analysis, I conclude that the instrument continues to build an upward trend segment. The wave structure still fully depends on the news background linked to Trump's decisions, as well as the external and internal policies of the new White House Administration. The targets of the current trend segment may extend as far as the 1.25 level. The news background remains unchanged, so I continue to hold long positions despite the achievement of the first target near 1.1875, corresponding to the 161.8% Fibonacci level. By the end of the year, I expect the euro to rise to 1.2245, which corresponds to the 200.0% Fibonacci level.

On the smaller scale, the entire upward trend segment is visible. The wave structure is not the most standard, since corrective waves differ in size. For example, the larger wave 2 is smaller than the internal wave 2 within 3. However, this happens as well. Let me remind you that it is best to identify clear structures on charts, without necessarily attaching to every wave. The current upward structure leaves practically no questions.

The main principles of my analysis:

1. Wave structures should be simple and clear. Complex structures are hard to trade and often bring changes.
2. If there is no confidence in the market situation, it is better not to enter it.
3. One can never have 100% certainty about the direction of movement. Always remember protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.