FX.co ★ The number of FOMC rate cuts will depend on the dynamics of inflation

Demand for the American currency continues to decrease across the market spectrum. Although wave analysis has suggested increased demand for the US currency for several weeks, the market still needs to transition to constructing a new impulsive wave for both pairs. If there were logical reasons for this last week or month due to the ECB and Fed meetings, there are no such reasons now. The ECB and Fed meetings are already history. Based on what Powell and Lagarde said, the market cannot trade for two more weeks. We have already clarified that Powell's and Lagarde's rhetoric only seems diametrically opposite at first glance. Upon closer inspection, it becomes clear that both central banks will adhere to a policy of lowering rates next year.

This is exactly what Jerome Powell spoke about last week and what San Francisco Fed President Mary Daly mentioned on Tuesday. Daly noted that in 2024, it will be necessary to soften monetary policy to avoid excessive impact on the economy and the market. She added that everything would depend on the dynamics of inflation. The Fed may cut rates 4 or 5 times if inflation falls faster. If inflation declines more slowly, there will be 2-3 cuts.

If we assess the situation in general, FOMC members have been saying the same thing for several months: everything will depend on inflation. Not on the labor market, the economy, or inflation. Inflation remains the regulator's headache; all other indicators can be neglected. Economic growth in the US is high, so there is no need to worry about a recession now. It may be possible in 2024, but by then, the regulator will already be actively lowering the interest rate, which means the pressure on the economy will weaken.

Based on the above, no one can know how often the Fed will cut rates and how many times the ECB will. We can only speculate. Suppose the market is already trading based on its vision of the rate situation in 2024. In that case, predicting the movement of any pair becomes extremely difficult because we cannot know the majority view of market participants. And even the opinion of other analysts cannot be considered authoritative since analysts analyze but do not buy and sell billions of currency.

Based on the conducted analysis, I conclude that the construction of a bearish wave set continues. Targets around the 1.0463 mark have been ideally worked out, and the unsuccessful attempt to break through this mark indicated a transition to the construction of a corrective wave. Wave 2 or b has taken on a completed form, so I expect the construction of an impulsive downward wave 3 or c with a significant decrease in the pair soon. I still recommend selling with targets below the low of wave 1 or a. Stop-loss orders can be placed above the peak of the presumed wave 2 or b.

The wave pattern of the pound/dollar pair suggests a decline within the descending wave 3 or c. At this time, I recommend selling the pair with targets below the 1.2039 mark because wave 2 or b must ultimately be completed and may end at any time. The longer it turns out, the stronger the subsequent pound decline will be. The peak of the presumed wave e in 2 or b can be used for sales, and the order limiting possible transaction losses can be placed above it.