Problems in France Haven't Even Started Yet

[Redator]

Demand for the European currency continues to decline, but from my perspective, there is nothing alarming about that. We all want to see ideal wave patterns or perfect technical setups that provide clear entry opportunities and consistent profits. However, in practice, things often turn out differently. Currently, the euro's decline contradicts the wave structure. Wave 4 (if that's truly what it is) is taking on a five-wave form. This is possible within the a-b-c-d-e correctional formation.

If the wave count is incorrect, the trend section that began on September 17 (right after the FOMC meeting) still doesn't appear impulsive in nature. Therefore, I don't expect a new downward trend segment to form in the near future.

The main topic of discussion this week is the political crisis in France. I won't list every detail that's circulating online because, ultimately, they are not critical for market participants. I would simply say that the dissolution of Parliament would be a problem. Resignation of Emmanuel Macron would be a blow. But the appointment of a fifth prime minister in the last couple of years is not yet a crisis.

Some analysts suggest Macron might dissolve the Parliament and call snap elections, where his party would further lose ground. The French president understands this and is unlikely to take such a step. The possibility of him "firing himself" is also very low. If in the past two years the fifth prime minister has already been appointed, then Macron has had at least four clear opportunities to step down. Since he didn't do so, then it's safe to assume he doesn't intend to now.

Thus, everything points toward the appointment of a new prime minister, and the euro—if French domestic politics indeed drive its current decline—should begin to recover.

Let me also remind you that traders should not be focused solely on France's political crisis. The situation in the United States remains extremely complex. Many economists are discussing the potential for a recession, despite the record GDP growth in Q2. Donald Trump continues to raise tariffs and may soon enter into an open confrontation with Russia and Venezuela. Perhaps it's not for nothing that the Department of Defense was renamed the Department of War.

Global tensions continue to rise—due to geopolitics, trade barriers, and policymakers' inability to do their job, namely, to negotiate.

Wave outlook for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument is continuing to form an upward trend segment. The wave pattern still depends entirely on the news background, particularly decisions made by Donald Trump, as well as the domestic and foreign policies of the White House.

Target levels for the current trend segment could extend as far as the 1.2500 area. Currently, corrective wave 4 appears to be either complete or nearing completion. The upward wave structure remains intact. Therefore, I'm currently only considering long positions. By the end of the year, I expect the euro to rise toward 1.2245, which corresponds to the 200.0% level on the Fibonacci scale.

Wave outlook for GBP/USD:

The wave structure of GBP/USD has changed. We are still dealing with an upward impulsive trend, but its internal wave structure is becoming less readable. If wave 4 takes on a complex three-wave form, the overall structure should normalize. However, in this case, wave 4 will be significantly more complicated and larger than wave 2. In my view, the most practical approach now is to use the 1.3341 level as a reference point, which aligns with the 127.2% Fibonacci level. Two unsuccessful attempts to break through this mark indicate the market's readiness for new buying waves. The instrument's targets still lie no lower than the 1.3800 range.

Basic principles of my analysis:

1. Wave structures should be simple and easy to interpret. Complex formations often lead to change or breakdown.
2. If there is no confidence in the market situation, it's better not to enter.
3. There can never be 100% certainty regarding the direction of prices. Always use protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.

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