FX.co ★ The Dollar Awaits a Crash; There's No Other Option

The U.S. dollar index fell by 7% in 2025 during Donald Trump's presidency. However, few doubt that the current market calm is merely a pause before a new decline in the American currency. The news backdrop in the U.S. can be described as both "bad" and "conducive to the dollar's decline," depending on one's perspective. It's worth noting that the dollar looks very weak against the euro. The European Central Bank is unlikely to cut interest rates again in the coming year, while the Bank of England may conduct a few more rounds of monetary easing, as it lags far behind the ECB.

At the same time, the Federal Reserve is 100% likely to continue its easing policy. Whether quickly or slowly, with breaks or without, it will persist. As a result, the dollar's position will continue to deteriorate. Moreover, Donald Trump himself is a significant pressure factor on the American currency, even without considering his decisions that led to labor market declines, restrictions on labor migration, widespread protests among the American population, and highly controversial economic outcomes. Trump has repeatedly stated that he wants to see the U.S. dollar cheaper, making American exports more attractive in international markets.

One of Trump's primary goals is to mitigate the trade balance deficit. In the first nine months of his second presidential term, there has been little positive impact on the U.S. trade balance. America continues to buy about $70-80 billion more in goods each month than it sells. A cheaper dollar has not increased U.S. exports, as Trump's tariffs against half the world's countries have significantly reduced the willingness of many foreign consumers to buy American goods. It has become clear that American products are not as appealing or unique to the rest of the world as to warrant a political agenda led by the American president. An unspoken rule has now emerged: "buying American means supporting Trump's trade policy," which is actively spreading on social networks.

Therefore, the dollar remains under pressure due to uncertainty about the U.S. economy, trade policy, the Fed's independence from the White House, and other factors. Thus, it's easy to assume (if the situation does not improve) that the decline of the American currency will continue.

Wave Picture for EUR/USD:

Based on my analysis of EUR/USD, the instrument continues to develop a bullish segment of the trend. In recent months, the market has paused, but Donald Trump's policies and the Fed remain significant factors in the U.S. dollar's future decline. The targets for the current segment of the trend could reach the 25 figure. Currently, we are in the process of constructing corrective wave 4, which is taking a very complex and extended form. Its last internal structure— a-b-c-d-e is presumed to be complete. If this is indeed the case, I expect the instrument to rise with targets around annual highs.

Wave Picture for GBP/USD:

The wave picture for GBP/USD has changed. We continue to deal with a bullish, impulsive segment of the trend, but its internal wave structure has become complex. Wave 4 has taken on a three-wave form, resulting in an elongated structure. The downward corrective structure a-b-c-d-e in wave 4 is presumed to be complete. If this is indeed the case, I anticipate the main wave structure will resume its development, with initial targets around the 38 and 40 levels. The key is that the news backdrop should be slightly better than it was this week.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often lead to changes.
2. If there's market uncertainty, it is better not to enter.
3. There is never 100% certainty in market direction. Always remember to use protective stop-loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.