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Fundamental analysis

25.05.202600:54 Forex Analysis & Reviews: American Dollar. Week Preview

The American currency is approaching the new week in a semi-position from which it can either continue to strengthen or begin to decline. It is likely that at the start of the new week, the market will decrease demand for the U.S. dollar amid a calming situation in the Middle East. If the U.S., Iran, and a number of Middle Eastern states indeed sign a framework agreement, it would be a huge step forward, a breakthrough in negotiations, and it would show that a full ceasefire between the West and East is possible, not just in words. However, if Trump's words are once again not confirmed, it will indicate an increased risk of war resuming. Certainly, under such circumstances, the demand for the U.S. dollar would rise again.

I want to note that a final agreement between Iran and the U.S. is still far off, and there are no guarantees it will be signed in the future. I remind you that the "nuclear question" remains the cornerstone of the confrontation. Iran has publicly refused several times to export its stock of enriched uranium outside the country and to suspend its nuclear facilities or dismantle nuclear laboratories. In other words, Tehran is still not ready to meet the U.S.'s main demand, which led to the war beginning three months ago. Personally, I still do not see a way out of the current situation. Consequently, the parties may sign ten more framework agreements, preliminary agreements, agreements to continue negotiations, or agreements to agree to negotiate, but we may never see a final deal. In this case, the conflict will remain in a state of hibernation, and it can stay in such a state for many years, threatening to flare up at any moment. At least, as long as Trump remains president of the United States.

In America, next week I can highlight the important events from the second estimate of the first-quarter GDP report, the core personal consumption price index, and the durable goods orders report. I cannot say these data will resonate with traders, but these are the most significant economic events for the upcoming week. Personally, I lean towards the view that the market will continue to react only to geopolitical news. If these events change as frequently as they did this week, the currency market will remain in a state of "swings."

Wave Picture for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that the instrument remains within an upward section of the trend (lower picture), and in the more short-term perspective, it is within a corrective structure. The corrective wave set a-b-c appears to be complete. Consequently, the construction of wave 3 or C continues, which may be part of wave C. The entire wave C (if the current wave marking is correct) may complete its formation much below the 14 figure. However, such a scenario will require strong geopolitical support. Otherwise, the downward wave set may take the form of a-b-c and be completed around the 1.1578 mark.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become clearer over time. We now see a distinct upward structure on the charts, which is complete. Therefore, I expect a downward wave set to form, which may take an impulsive form and align with the impulsive structure of the EUR/USD instrument. Consequently, after a decline of 300 pips, a corrective wave can be expected, followed by a new drop towards the 30-31 figures. I had warned in advance about the new decline of the pound, but I expected a correction. Since geopolitics changes character practically every week, none of the wave scenarios can be 100% certain.

Main Principles of My Analysis:

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

*Analisis pasar yang diposting disini dimaksudkan untuk meningkatkan pengetahuan Anda namun tidak untuk memberi instruksi trading.

Chin Zhao,
Analytical expert of InstaSpot
© 2007-2026

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