On Wednesday and Thursday, three central bank meetings took place. A central bank meeting is always a market event, even if no important decisions are made. In most cases, the market is already aware of the central bank's decisions and changes in its monetary stance in advance. However, even in this case, the market typically reacts exuberantly to any hint or change in the central bank's accompanying statement. Thursday evening can confidently be declared as not one of those instances.
The key event of Wednesday's meeting was that Jerome Powell is stepping down after 8 years. Powell dedicated his speech to several crucial issues regarding the future of the central bank and the U.S. economy. Let's break it down step by step. First and foremost, the Federal Reserve decided for the third consecutive time to keep the interest rate unchanged. This decision was dictated by the complete uncertainty surrounding the conflict in the Middle East.
In fact, the uncertainty grows more defined with each passing day. Let me remind you that another "insider" report came out, stating that Donald Trump is preparing for a prolonged blockade of Iranian ports and the Strait of Hormuz, which represents a financial blockade for Iran. Trump has taken a different approach after unsuccessful military attempts to force Iran to abandon its nuclear weapons. Now the leader of the White House wants to bring Tehran to the negotiating table "by any means necessary." In simpler terms, Trump believes that without money, Iran will quickly yield and will not be able to withstand potential new bombings from the U.S.
I do not know how accurate this "insider" information is, but recent events over the last three weeks point exactly in this direction. Negotiations between the U.S. and Iran have stalled; Trump continues to insist on keeping talks going over the phone, while Tehran denies any negotiations with Washington and demands the lifting of the blockade on Iranian ports for talks to resume. Therefore, in my view, even if some phone discussions are occurring, they are not helping advance toward a peace agreement. Iran has repeatedly called attention to Washington's attempts to force it to sit at the negotiating table and sign a deal on American terms. Iranian authorities deem such an arrangement unacceptable, which is why they are not agreeing to new negotiations. Based on this, it can be concluded that negotiations will not take place anytime soon, and the conflict may indeed become protracted.
Based on the analysis of EUR/USD, I conclude that the instrument remains within an upward section of the trend (bottom picture) and, in the short term, is within a corrective structure. The corrective wave set appears to be complete and may take on a more complex, extended form only if the geopolitical background in the Middle East improves. Otherwise, from current positions, a new downward wave set may begin to form. We have observed the corrective wave; further developments will depend on market belief in a favorable outcome of negotiations.
The wave pattern for GBP/USD has, over time, become clearer, as I anticipated. Now we see a clear three-wave upward structure on the charts, which may already be complete. If this is indeed the case, we can expect the formation of at least one downward wave (presumably d). The upward segment of the trend could take on a five-wave form, but for that to happen, the conflict in the Middle East must subside rather than reignite. Therefore, the baseline scenario for the coming days is a decline towards the 34 figure or slightly lower. Again, everything will depend on geopolitical factors.
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