As I have already said in my previous articles, talking about key economic indicators, the market has become too much. Almost every day, we see the same thing: the threat of recession in the economy, rate hikes, high inflation, the risk of rising unemployment, the deterioration of the geopolitical situation in Ukraine, new sanctions, sabotage, terrorist attacks, and so on. In such an abundance of news, it is difficult not to get confused in an elementary way. And I can conclude that the market is either already confused because it does not understand what to do with all this data or does not pay attention to it.
The easiest way to understand what is happening is by looking at the most senior scales of the graphs. The European and British economies began their decline in 2008 and 2007. That is, during the global economic crisis. Since then, from time to time, building corrective waves (and even very strong ones), both instruments have only been declining. Thus, the demand for the euro and the pound has been falling to one degree or another for about 15 years. If we take only the last descending waves, the euro has been declining for almost 2 years, and the pound for 1.5 years. The fall began even before the geopolitical conflict in Ukraine, before the Fed and other regulators started raising their rates! We are dealing with a global trend that has persisted for years and decades.
Based on all of the above, I think that the usual talk about recession, unemployment, and high inflation, even in the context of the last sections of the trend, does not play a special role. Demand for the dollar is growing, despite the good news from the European Union and bad news from the United States. It is growing against the background of rising expectations of a Fed rate hike and falling expectations of a Fed rate hike. And I don't think anything will change in the near future.
US Senator Bernie Sanders said this week that the Fed is only exacerbating the impending economic crisis with its actions. He reproached Jerome Powell for his desire to sacrifice economic growth, low unemployment, and a strong labor market in favor of reducing inflation. Sanders noted that it is extremely important to fight inflation, but ordinary Americans are behind the concepts of unemployment and the labor market. If unemployment rises, ordinary Americans will lose their jobs and livelihoods. The same is true for the labor market. However, this decision was approved by both boards of the US Congress, although Sanders himself is not among the adherents of this method of solving the problem of inflation.
Sanders notes that in recent months, logistical problems worldwide have begun to ease, and import prices to the United States have declined significantly (due to the high dollar). However, inflation remains at a high value, which is a dangerous phenomenon for Joe Biden and his government. In other words, even under favorable conditions and considering the interest rate increase to 3%, it is not possible to significantly reduce inflation.
Based on the analysis, I conclude that the construction of the downward trend section continues but can end at any time. At this time, the instrument can build a new impulse wave, so I advise selling with targets near the estimated mark of 0.9397, which equates to 423.6% by Fibonacci and by MACD reversals "down." I urge caution as it is unclear how much longer the overall decline of the instrument will continue and whether the current wave structure will transform into an upward one.