U.S. Dollar: Weekly Preview

[Ben Graham]

Strangely enough, important events are scheduled for next week in the United States. While the UK and the Eurozone are already beginning their Christmas and New Year celebrations, America continues to operate. On Tuesday, reports on GDP, durable goods orders, and industrial production will be released. These are certainly not trivial and insignificant data releases. On Wednesday, initial unemployment claims will be published. After that, the limit of significant events will be reached even for the United States. Then comes Christmas.

The news backdrop next week will be limited to the U.S., and the aforementioned reports could add some excitement to the pre-New Year routine. However, I want to emphasize again that despite a multitude of important events over the last two weeks, the market has reacted quite modestly. Consequently, the two reports expected next week are unlikely to significantly wake up the market. I cannot say whether the market will lean towards buying dollars since the current wave analysis continues to indicate alternating corrective wave sets. Thus, from their current positions, both instruments may continue to build upward segments of the trend but could also start new downward movements. I believe that until the end of the holidays, we will not see any interesting movements or changes in the current wave layout.

Wave Analysis for EUR/USD:

Based on my analysis of EUR/USD, I conclude that the instrument continues to build an upward trend. Donald Trump's policy and the Federal Reserve's monetary policy remain significant factors in the long-term decline of the U.S. dollar. The targets for the current trend segment could extend up to the 25th figure. The current upward wave collection is starting to develop, and I believe we are now observing the formation of an impulse wave set, which is part of global wave 5. In this case, we should expect growth with targets around 1.1825 and 1.1926, corresponding to 200.0% and 261.8% on the Fibonacci scale.

Wave Analysis for GBP/USD:

The wave structure for GBP/USD has changed. The downward corrective structure a-b-c-d-e in C at 4 appears to be complete, as does the entire wave 4. If this is indeed the case, I expect the primary trend segment to resume building, with initial targets around the 38 and 40 figures.

In the short term, I anticipated the construction of wave 3 or C, with targets located around the 1.3280 and 1.3360 levels, equating to 76.4% and 61.8% on the Fibonacci scale. These targets have been reached. Wave 3 or C continues to develop, but three unsuccessful attempts to break the 1.3450 mark, which corresponds to 61.8% on the Fibonacci scale, are causing concern—could wave D in 4 now be starting?

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often carry 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 market direction. Do not forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.

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