All That's Left Is to Wait...

[Redator]

In recent analyses, I've repeatedly mentioned that the market's main challenge right now is uncertainty. Both major instruments—EUR/USD and GBP/USD—have been trading within relatively narrow ranges for several months now. It feels as if the market is frozen, not in anticipation of a holiday miracle, but simply awaiting data and facts.

What have we learned during the first two days of this week? Virtually nothing. Negotiations between China and the United States seem to be ongoing, but could collapse at any moment. Donald Trump continues to make new demands, and China's patience is not unlimited. On Monday, Trump demanded that China resume soybean purchases. Previously, he had threatened to ban the purchase of soybean oil. One of the key sticking points remains China's new export restrictions on rare earth minerals. In short, there are many "sharp edges" between the two powers, and there's no guarantee they'll reach the long-awaited agreement.

As for the next Federal Reserve meeting, things appear straightforward on the surface—but a "surprise" could still catch traders off guard. The market's currently dovish expectations rest almost entirely on the perceived weakness in the U.S. labor market. Market participants are not only expecting an interest rate cut in October but also in December and January. In essence, medium-term dovish expectations have formed without any real economic data. But what if the U.S. labor market is already recovering and that recovery is simply going unreported due to the government shutdown? It's very possible that the FOMC might lower rates again in October, but then pause in December.

It seems we understand the labor market situation—but if it was experiencing a slowdown this summer, that doesn't guarantee it is still slowing this fall. So drawing any definitive conclusions about the health of the labor market would be premature.

Based on all of the above, the market is standing still, waiting for concrete developments. These could come in the form of long-delayed U.S. data releases, direct statements from Jerome Powell, or a final outcome in the China–Trump negotiations. However, in my view, such clarity may remain scarce through the end of the year. The "clash of titans" will likely continue. Trump will keep imposing tariffs on new sectors and countries. Pressure on the Fed will resume the moment interest rate cuts stop. And the shutdown could very well break a new record in duration, despite forecasts to the contrary. Until these issues are resolved, we will likely continue to observe sluggish, directionless price movement.

Wave Pattern for EUR/USD:

Based on my current analysis, EUR/USD is still developing an upward wave segment. The wave structure continues to depend entirely on current news—especially Trump's actions and both domestic and foreign policy developments out of the White House. The current wave may extend to the 1.25 zone. Currently, we appear to be completing corrective wave 4, which has taken on a complex and drawn-out form. Therefore, I continue to expect only purchasing opportunities in the near term. By year-end, I anticipate that the euro will rise toward the 1.2245 level, which corresponds to the 200.0% Fibonacci.

Wave Pattern for GBP/USD:

GBP/USD's wave picture has evolved. We remain within the bounds of a bullish impulsive segment, but the internal structure is becoming more complicated. Wave 4 has formed into a three-wave correction, which is significantly more extended than wave 2. The latest three-wave downward correction appears to have ended. If this assumption proves accurate, the pair's growth may continue in alignment with the broader wave structure. The initial targets of this potential bullish extension lie near the 1.38 and 1.40 zones.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex formations are difficult to trade and often require adjustment.
2. If you're uncertain about what's happening in the market, it's better to stay out.
3. Absolute certainty in market direction does not exist. Always use stop-loss orders to protect capital.
4. Wave analysis can and should be used in conjunction with other forms of analysis and trading strategies.

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