Forex Analysis & Reviews: 12.05.2025 - US Dollar. Weekly Preview

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InstaForex Loprais Team - Official participant of the Dakar rally

12.05.2025 12:59 AM

US Dollar. Weekly Preview

The U.S. economic calendar for the upcoming week won't be overloaded with data. If we leave out the secondary reports, only April's Consumer Price Index (CPI) remains, which will be released on Wednesday. As a reminder, the Federal Reserve decided to keep interest rates unchanged, based primarily on inflation, which, according to Jerome Powell, may spike due to Donald Trump's trade policy. That's why Powell and the FOMC are reluctant to rush into cutting rates.

Accordingly, if inflation accelerates in April, Powell's concerns will be validated. The higher the inflation rises, the more likely the Fed will maintain its current monetary policy through the end of the year. Although Powell himself doesn't expect a strong acceleration in price growth, one cannot ignore the impact of tariffs, which will make many goods in the U.S. more expensive. Therefore, Powell's concerns are not without merit.

It won't mean much if inflation remains unchanged in April (as expected) at 2.4%. Powell has clearly stated that we need to wait until summer to draw conclusions about the effects of Trump's tariff policy. Consequently, regardless of the inflation data, the Fed will wait for the summer to assess how much the economy slows down and how much inflation rises.

If the Consumer Price Index slows down, it still won't matter, because the Fed will remain on hold until it can evaluate the full scale of the damage caused by Trump's tariffs. Therefore, the inflation report will not be decisive for the dollar. All other U.S. reports are of even less significance to the market in the current environment.

Wave Pattern for EUR/USD:

Based on the analysis of EUR/USD, the instrument is continuing to build an upward trend segment. In the near term, the wave structure will entirely depend on the stance and actions of the U.S. president. This should be kept in mind at all times. The formation of wave 3 of the upward trend has begun, and its targets may stretch as far as the 1.25 area. Reaching those levels depends solely on Trump's policies. At the moment, wave 2 within wave 3 appears near completion. Therefore, I am considering long positions with targets above 1.1572, corresponding to the 423.6% Fibonacci level.

Wave Pattern for GBP/USD:

The wave pattern of GBP/USD has transformed. We are now dealing with a bullish, impulsive section of the trend. Unfortunately, under Trump, the markets may face many shocks and reversals that defy wave structure and any form of technical analysis. The formation of upward wave 3 continues with nearby targets at 1.3541 and 1.3714. Ideally, we would like to see a solid corrective wave 2 within wave 3, but it seems the dollar cannot afford such a luxury right now.

Core Principles of My Analysis:

Wave structures should be simple and easy to interpret. Complex patterns are hard to trade and often require adjustments.
If you're uncertain about what's happening in the market, it's better not to enter.
Absolute certainty in market direction is never possible. Always use protective Stop Loss orders.
Wave analysis can and should be combined with other analysis and trading strategies.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.