Fed Meeting. The Day Before

Ben Graham · 5 horas atrás

On the eve of the Federal Reserve meeting, the first of the current year, the dollar is in a state of cultural shock and knockout. In essence, I see little point in this week's Fed meeting. Certainly, it should not be ignored, but the market clearly knows what needs to be done right now. Dollar sales have been ongoing for more than a week, so what can the Fed meeting change in this situation? Especially considering that exchange rate stability is not a goal of the FOMC?

In my view, the outcomes of the FOMC committee meetings are already known. Jerome Powell promised in December of last year to take a "pause," and he is likely to keep his word. Of course, Stephen Miran, Christopher Waller, and Michelle Bowman will once again vote for easing monetary policy, but they will remain in the minority. Other topics related to the Fed are now on the agenda.

Firstly, Donald Trump may announce the name of the new head of the US central bank soon. In my opinion, it doesn't really matter who it will be since it will still be a "Trump person." A "Trump person" will create psychological pressure on the hawkish members of the FOMC committee from within, while Trump will apply pressure from outside. Let me remind you: it is not enough to replace the current Fed chairman with a more loyal one. The majority of the Fed governors need to adopt Trump's viewpoint. Therefore, for now, it will focus on internal pressure on FOMC members who do not want to lower rates to minimal levels.

Secondly, the legal disputes concerning Lisa Cook and Powell remain on the agenda. The US Supreme Court reinstated Cook as a Fed governor last fall while the investigation is ongoing. But the investigation has not yet concluded, meaning Cook could still be removed from her position. The same applies to Powell. Although he will leave the post of Fed chair in May of this year, he could remain on the FOMC committee until mid-2028, which clearly does not align with Trump's plans. The American court could take months or even years to resolve this, but Trump may try to expedite the process. Hopefully, not by imposing tariffs on the Supreme Court justices.

Given all of the above, I believe that the Fed meeting will not significantly influence market sentiment and will not provide meaningful support for the US currency. For the dollar, it is practically meaningless. What is far more important is what surprises Trump may throw at the markets in the near future.

Wave Picture for EUR/USD:

Based on my analysis of EUR/USD, I conclude that the instrument is continuing to build an upward trend segment. Trump's policy and the Fed's monetary policy remain significant factors in the long-term decline of the American currency. Targets for the current trend segment may reach up to the 25-figure mark. At this moment, I believe corrective wave 4 has completed its formation, so I expect further increases in quotes, with the first target around 1.2040.

Wave Picture for GBP/USD:

The wave structure for the GBP/USD instrument has become clearer. Currently, the presumed wave 5 is forming within wave 5, but the internal wave structure of global wave 5 may take a much more extended form. I believe that the price increase will continue in the near future, with targets around 1.3913, corresponding to 127.2% on the Fibonacci. After the current five-wave formation is completed, the instrument may build three corrective waves. However, at this point, the upward segment is not yet finished, and after the correction, I expect a new impulsive segment of the trend towards the 42-figure.

Key Principles of My Analysis:

Wave structures should be simple and clear. Complex structures are hard to play back and often carry changes.
If there is no confidence in what is happening in the market, it is better not to enter.
There can never be 100% certainty in the direction of movement. Do not forget about protective Stop Loss orders.
Wave analysis can be combined with other forms of analysis and trading strategies.

The material has been provided by InstaForex Company - www.instaforex.com