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09.02.202404:33 Analisis Forex & Kajian: Geopolitics will support the dollar!

Over the past few months, I have regularly mentioned that I expect a pronounced growth from the US dollar. Let's be honest: the timelines have shifted forward because the market has been in a pause phase for too long. This pause lasted for a month and a half for the British pound. The euro started to fall without such a long break but could have done a little faster. Nevertheless, both instruments maintain bearish prospects based on the current wave layout.

In addition to the wave layout, I have repeatedly pointed out that the market is expecting a rapid rate cut from the Federal Reserve and they refuse to buy the dollar for this reason. This situation was observed a month ago, two months ago, and three months ago. However, now the market is starting to change its opinion. The probability of a March rate cut has decreased to 16.5%, according to CME Group's FedWatch tool, whereas a month ago, it exceeded 80%. In addition, various companies and banks are starting to turn away from the possibility of a March rate cut. Even two giants like Morgan Stanley and Goldman Sachs have revised their forecasts in favor of later easing.

All of this should support demand for the US currency in the market. Economists at HSBC also expect the dollar to strengthen modestly over the medium term since the market has revised its expectations for policy easing in favor of less aggressive ones. Market repricing of a less aggressive global easing path has seen the dollar outperform in the G10 space so far this year. Take note that many investors and traders consider the dollar as the "world reserve currency," that is, the most stable and secure currency. When a new conflict begins in the world (in one country or another), the outflow of investments occurs precisely in the dollar or other safe assets.

HSBC economists also believe that the demand for the US dollar will increase based on the fact that the American economy is showing much higher results than the European or British economies. They do not expect a strong rise, but I do, as I also rely on the wave pattern. And the wave pattern is telling us one thing: either the third wave of the downward segment of the trend will be built for both instruments, or the wave layout will become significantly more complex, and for some time, it will be very difficult to understand what is happening in the market.

Based on the analysis, I conclude that a bearish wave pattern is being formed. Wave 2 or b appears to be complete, so in the near future, I expect an impulsive descending wave 3 or c to form with a significant decline in the instrument. The failed attempt to break through the 1.1125 level, which corresponds to the 23.6% Fibonacci, suggests that the market is prepared to sell a month ago. I will only consider short positions with targets around the level of 1.0462, which corresponds to 127.2% Fibonacci.

The wave pattern for the GBP/USD pair suggests a decline. At this time, I am considering selling the instrument with targets below the 1.2039 mark because wave 2 or b will eventually end, just like the sideways trend. I would wait for a successful attempt to break through the 1.2627 level, which, hopefully, everyone managed to open. Take note that after a daily decline, the instrument may temporarily rebound, but I only expect it to fall further.

* Analisis pasaran yang disiarkan di sini adalah bertujuan untuk meningkatkan kesedaran anda, tetapi tidak untuk memberi arahan untuk membuat perdagangan.

Chin Zhao,
Analytical expert of InstaSpot
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