04.02.202600:28 Forex Analysis & Reviews: The ECB is Ready to Intervene if the Euro Continues to Fall

For a long time, it was believed that the ECB's monetary policy was determined by inflation and economic growth, more so by inflation in recent years. The European Central Bank aimed to bring the consumer price index back to the 2% mark and has successfully achieved this. Therefore, in recent months, I have noted in my reviews that inflation is no longer significantly influencing the ECB's stance. However, with the new decline in the US dollar, the euro has risen even more, placing the Eurozone economy in a very uncomfortable position.

I have previously written that a strong euro is not beneficial for Europe, just as a strong dollar is not beneficial for America. Both economies are export-oriented, and the higher the currency value, the lower the demand abroad. Additionally, Europe and the US find it increasingly difficult to compete with China. While China used to be notorious for cheap consumer goods, its primary advantage being price, it now produces many quality goods that are significantly cheaper than their American and European counterparts.

Consequently, the higher the euro, the lower the demand for European goods, even within the Eurozone itself. Europeans are not foolish. Why buy a mug for 20 euros made in Germany when a similar mug in China costs at most 1 euro? Brussels is doing its utmost to combat such disregard for domestic production by imposing various tariffs, sanctions, and taxes on foreign goods. This is done "to support European business and manufacturing." However, in my view, this is a very poor way to stimulate consumers to buy local products.

Europe cannot provide its population with affordable goods, whereas China can. The US cannot provide its citizens with affordable goods, but China can. Even Donald Trump could not completely halt the flow of goods from China. That is why the leader of the White House is striving to ensure that American citizens pay as much for Chinese goods as they do for American ones. Remember, Americans, not China, pay all trade tariffs. If necessary, China will find other markets for its products. It is worth noting that China's exports set a new record in 2025, despite the trade war with the US.

Wave Picture for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build an upward segment of the trend. Donald Trump's policies and the Fed's monetary policy remain significant factors in the long-term decline of the American currency. The targets for the current trend segment may extend up to the 25-figure. At this moment, I believe that the global wave 4 has completed its formation, so I expect further increases in quotes. However, I anticipate a downward wave in the near term, as the series of waves a-b-c-d-e also appears to be complete. In the near future, my readers can search for benchmarks for new purchases.

Wave Picture for GBP/USD:

The wave picture of the GBP/USD instrument is quite clear. The five-wave upward structure has completed its formation, but the global wave 5 may take on much more extended forms. I believe that a corrective set of waves may be observed in the near future, after which the upward trend construction will resume. Therefore, in the coming weeks, I can advise looking for opportunities for new purchases. In my opinion, under Donald Trump, the British pound has every chance to be valued at 1.45-1.50 USD. Trump himself supports the decline of the dollar. All of his actions have a double positive effect: the decrease of the dollar and the resolution of internal, external, trade, and geopolitical issues.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often lead to changes.
2. If there is no confidence in what is happening in the market, it is better not to enter it.
3. There is never 100% certainty in the direction of movement. Do not forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.