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18.06.2025 12:36 AM
What to Expect from the Fed Meeting?

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The results of the Federal Reserve's fourth policy meeting in 2025 will be announced Wednesday evening. Some analysts have referred to this event as a "turning point," although I'm not entirely clear on what direction is expected to change. Currently, demand for the U.S. dollar depends 80% on the development of the Global Trade War and 20% on other decisions by Trump related to global politics. Therefore, decisions made by central banks (surprising as it may sound) are not all that important right now. Trump redirects capital flows and influences the economy more effectively than any central bank. Currently, in terms of "impact," Trump trails only the coronavirus, which in 2019 triggered the most severe collapse in economic growth in recent decades.

However, Trump is not a global pandemic that forced people to stay home for months, miss work, or keep children out of school. Trump came in with the slogans of a victor—even though America didn't seem to need a "winner," at least not at such a cost. As a result of Trump's policies, the market is entirely indifferent to what changes may occur in monetary policy in 2025. The European Central Bank and Bank of England could cut rates to zero, and the Fed could raise them to 10%—demand for the U.S. dollar is declining either way.

Based on the above, I believe the real question on Wednesday evening will be: will the Fed make a decision that sends the dollar to new depths? If Jerome Powell or the "dot plot" signals a dovish shift in the Fed's outlook, that would suggest two rate cuts in the second half of 2025. I'll remind you that the first dot plot of this year pointed to just such a scenario. In that case, the market would have fresh reasons to sell the dollar.

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If the Fed takes a more hawkish stance and insists on a "wait-and-see" approach, basing decisions on further data analysis, demand for the U.S. dollar might remain stable, but there would be no case for strengthening the greenback in any scenario. Currently, justifying the appreciation of the dollar feels like writing science fiction.

Wave Structure for EUR/USD:

Based on my analysis of EUR/USD, I conclude that the instrument continues to build a bullish trend segment. The wave count still depends entirely on the news background related to Trump's decisions and U.S. foreign policy. The targets of wave 3 may extend as far as the 1.2500 level. Therefore, I consider buying with initial targets around 1.1708 (which corresponds to 127.2% Fibonacci), and potentially higher. A de-escalation of the trade war could reverse the bullish trend, but currently, there are no signs of a reversal or de-escalation.

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Wave Structure for GBP/USD:

The wave structure of GBP/USD remains unchanged. We are observing a bullish, impulsive trend segment. Under Trump, the markets may still face a great deal of volatility and unexpected reversals that don't align with wave counts or technical analysis. Nevertheless, the active scenario remains relevant for now, and Trump continues to do everything possible to suppress demand for the U.S. dollar. The targets for bullish wave 3 are around 1.3708, corresponding to 200.0% Fibonacci of the assumed global wave 2. Therefore, I continue to consider long positions, as the market has not yet shown a willingness to reverse the trend.

Core principles of my analysis:

  1. Wave structures should be simple and easy to understand. Complex structures are difficult to trade and often lead to changes.
  2. If there's no confidence in market conditions, it's better to stay out.
  3. 100% certainty in market direction doesn't exist and never will. Always remember to use Stop Loss orders.
  4. Wave analysis can be combined with other forms of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
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