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31.01.202500:49 Forex Analysis & Reviews: Fed Meeting Results and Key Takeaways

Relevancia 13:00 UTC--5

Exchange Rates 31.01.2025 analysis

On Wednesday evening, the results of the first Federal Reserve meeting of the year were released, yet the market largely ignored them. It's unclear why this happened. My assumption is that the market is currently focused on forming a corrective wave structure for both instruments, which does not suggest a strong increase in the U.S. dollar. However, the corrective waves (b in 2) could have taken a more convincing form.

From my perspective, sellers had a clear opportunity to push both instruments lower as early as Wednesday evening, continuing into Thursday. Powell's tone could not be classified as either hawkish or dovish, as it remained unchanged since the December meeting. He confirmed that the Fed will continue to ease monetary policy, but will do so gradually, as the central bank sees no need to hurry. The American economy is growing steadily, and the latest GDP report for the fourth quarter is not a "failure" in the literal sense. While GDP reports in Germany and the European Union have declined again, the U.S. economy has grown, this time by 2.3%, even though the market had expected a value of at least 2.6%. Inflation in the U.S. is also picking up, making a pause in easing more necessary than a new round of rate cuts.

Powell also addressed market participants' concerns regarding potential influence from Donald Trump on monetary policy adjustments. He made it clear that the Fed is an independent institution and does not answer to the U.S. President. Therefore, anyone expecting a stronger rate cut in 2025 due to Trump's influence can feel reassured. In my view, Powell's rhetoric is neutral but leans toward hawkish, as the Fed is likely to ease monetary policy much less aggressively than the markets had anticipated last year.

Exchange Rates 31.01.2025 analysis

The market paid much more attention to the US GDP report on Thursday. It ignored the dollar-positive rhetoric of the Fed, the European Central Bank's rate cuts, weak unemployment and GDP reports in the EU. Of all the reports, it chose the only one that was not in favor of the American currency, and played it. Because of this, wave b took on a very unconvincing appearance for both instruments, and the entire correction structure may take on a rather complex form.

Wave Analysis for EUR/USD:

Based on my EUR/USD analysis, the pair is still forming a bearish trend segment. The first wave of this segment appears well-structured and complete. Therefore, a three-wave or more complex corrective structure should be expected, presenting new selling opportunities at the highest points of this structure. Wave A within Wave 2 has already concluded, meaning Wave B within Wave 2 has begun and may finish as early as today.

Exchange Rates 31.01.2025 analysis

Wave Analysis for GBP/USD:

The wave structure of GBP/USD also indicates that the bearish trend remains intact, with Wave 1 already completed. Now, we should wait for a clear corrective wave (or a set of waves), after which new selling opportunities can be identified. The minimum target for the corrective structure is near the 1.26 level, while a more optimistic target is around 1.28. This could be an ideal time to complete Wave 1 within Wave 2.

Core Principles of My Analysis:

  1. Wave structures should be simple and clear. Complex structures are challenging to trade and often subject to change.
  2. If market conditions are unclear, it is better to stay out.
  3. There is never 100% certainty in market direction. Always use Stop Loss orders.
  4. Wave analysis can be combined with other analytical methods and trading strategies.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

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