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The economic reports scheduled for Wednesday can be considered important. Therefore, traders are unlikely to ignore them, but a strong market reaction should not be expected either. Traders are already looking ahead to Friday, when Kevin Warsh is scheduled to speak and the annual Nonfarm Payrolls report will be released. Therefore, despite the importance of the PCE Index, GDP data, and durable goods orders, these releases are not currently the main factors determining market sentiment or its attitude toward the U.S. dollar. What do the forecasts indicate? The Core Personal Consumption Expenditures (PCE) Price Index could rise by 0.2% in July, GDP growth could slow to 1.5% in the second quarter, and durable goods orders could increase by 0.7%. However, I would like to remind you that forecasts are only expectations, and the actual figures may be completely different.
Geopolitical developments should also not be overlooked. A great deal of news emerges every day, and traders' main task is to distinguish relevant information from noise. Today, it became known that the economic blockade of Iran may not take place if Iran opens the Strait of Hormuz. What is this? Another attempt by Donald Trump to achieve his desired outcome? The U.S. president understands perfectly well that with the Strait of Hormuz closed, lower oil, gas, and fuel prices cannot be expected. And with high prices for all types of fuel, he cannot expect an improvement in his approval ratings ahead of the elections or greater support for Republicans among American voters.
Furthermore, implementing an economic blockade of Iran would require sanctions against China, which is the main importer of Iranian oil. Is Trump prepared to begin a new confrontation with China just two months before the elections? Especially since Beijing has already stated that any sanctions or tariffs will receive a reciprocal response. For traders, the current situation leaves little choice but to assess the possibilities and wait for further developments. Words are one thing, but they often differ from actions. By now, probably everyone has heard of the TACO principle. Therefore, Trump's threats may ultimately remain just threats. Naturally, that would be a positive development, as Iran is also prepared to respond to any new U.S. measures aimed at pressuring the country.
News Calendar for the United States, European Union, and United Kingdom:
In my view, the pair remains in the process of forming a bullish trend. The fundamental backdrop shifted sharply in favor of the bears six months ago, but the trend itself cannot be considered canceled or complete. Therefore, the bulls may well continue their advance following two liquidity sweeps of clearly defined lows. At present, bullish traders have support in the form of Imbalance 21. A new buy signal may form this week. I see 1.1797 and 1.1850 as the targets for further gains in the euro.
The long-term outlook for the pound remains bullish. Following liquidity sweeps of the two most recent swings and the formation of a series of buy signals, the bulls continue to advance. I currently see no basis for a bearish move, as there are no bearish patterns or signals. The bulls received a buy signal from Imbalance 24, which remains valid. Traders may already consider taking profits based on this signal. A new buy signal was formed within Imbalance 26. The current target for the pound is the January 27 high at 1.3867. A liquidity sweep of the May 1 swing could push the pound somewhat lower, but it is unlikely to disrupt the bullish advance. A bullish signal should also be expected to form within Imbalance 27.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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