10.05.202400:51 Forex Analysis & Reviews: The US dollar stumbled again

The European and British currencies simultaneously began to rise on Thursday. At the time of writing this review, we didn't see a sharp growth, and I don't see any reason for the market to buy the pound and, even more so, the euro. The Bank of England meeting just ended, and the central bank sent a signal that it was closing in on interest rate cuts. BoE Governor Andrew Bailey did not even deny that the interest rate could be lowered at the next meeting in June. If this is indeed the case, then the European Central Bank and the BoE will start lowering rates synchronously. But no one knows when the Federal Reserve will start to ease its own monetary policy.

In fact, I would like to express it in a slightly different manner. At the moment, not only does no one know when the FOMC will begin to ease policy. There is uncertainty if it will even happen during the fall of 2024. Personally, I believe that we should not expect the first round of rate cuts until winter. From this, it follows that the ECB and the BoE will not only be the first to start easing financial conditions, but they will do so much earlier than the US central bank. In my opinion, this is an excellent basis to sell the euro and pound.

However, it seems that the market did not fully understand what Bailey meant. Or perhaps we just saw the initial market reaction, and the euro and the pound will eventually decline. The euro could fall. An unsuccessful attempt to break through the 1.0788 level showed that the internal corrective wave was formed. As for the pound, it has an important level at 1.2470, which prevents it from falling. Therefore, the euro has a much better chance of falling further.

But let's return to the BoE meeting. Bailey did not provide any time frames for when the rate could be lowered. He stated that it could be June, or it could be much later. He hints that the BoE may lower the rate once and then observe inflation for some time to avoid affecting its slowdown. He also said that central bank policy is not just about predicting the timing of the next rate cut. I consider Bailey's rhetoric to be dovish, as we hardly hear him speak about rate cuts. I will also mention that two BoE policymakers voted for a rate cut.

Wave analysis for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that a bearish wave set is being formed. Waves 2 or b and 2 in 3 or c are complete, so in the near future, I expect an impulsive downward wave 3 in 3 or c to form with a significant decline in the instrument. I am considering short positions with targets near the 1.0462 mark, as the news background supports the dollar. A successful attempt to break 1.0787, which is equal to 76.4% Fibonacci, will indicate that the market is ready for new short positions.

Wave analysis for GBP/USD:

The wave pattern of the GBP/USD instrument suggests a decline. I am considering selling the instrument with targets below the 1.2039 level, because I believe that wave 3 or c has started to form. A successful attempt to break 1.2625, which corresponds to 38.2% Fibonacci, indicates the completion of an internal, corrective wave 3 or c, but 1.2470 is still holding back the sellers from attacking, preventing the British from building a downward wave.

Key principles of my analysis:

Wave structures should be simple and understandable. Complex structures are difficult to work with, and they often bring changes.

If you are not confident about the market's movement, it would be better not to enter it.

We cannot guarantee the direction of movement. Don't forget about Stop Loss orders.

Wave analysis can be combined with other types of analysis and trading strategies.