Last week, the dollar received a mountain of gifts from fate. First, the Federal Reserve adopted a more hawkish stance than the market anticipated, and then the conflict between Israel and Hezbollah in the Middle East resumed, jeopardizing the deal between Iran and the U.S. Negotiations regarding the nuclear issue between Tehran and Washington predictably fell apart. Following this, the market started to anticipate the resumption of a full-scale war in the Middle East. Consequently, inflation is likely to accelerate further, and the Fed will be forced to raise rates more than just once. All of these factors, which were initially far from obvious, led to an increase in demand for the U.S. currency. The strengthening of the dollar complicated the wave patterns of the EUR/USD and GBP/USD instruments, but nothing terrible or extraordinary has occurred. However, if news of this nature continues to come from the Middle East, demand for the U.S. currency may continue to rise. In this case, wave C will take on a more elongated form.

Next week, some interesting events in the U.S. include the core PCE index, changes in durable goods orders, and the final GDP estimate for the first quarter. All of these reports will be released on the same day and at the same time. Therefore, for most of the week, the market will again track geopolitical news. It is impossible to predict how events will unfold in the Middle East. It is also impossible to forecast whether the conflict between Israel and Lebanon will end shortly, preserving the deal between Iran and the U.S. Even more so, one cannot predict whether Israel's attacks on Lebanon will revive the conflict between the U.S. and Iran. Consequently, market participants will once again have to react in real-time to all incoming news, carefully filtering out the noise. In my view, the potential to strengthen the U.S. currency is limited; however, I do not know how the conflict in the Middle East will unfold.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument remains within an upward segment of the trend (bottom chart), while in the shorter term, it is in a downward segment that may be nearing completion. In my view, now is a decent time to try and form long positions, but the instrument may dip below the 14 figure within wave C. If this assumption is correct, waiting a bit longer would be advisable. I believe the market will also take into account the European Central Bank's tightening and the possibility that the geopolitical conflict between Iran and the U.S. may conclude soon.

Wave Picture for GBP/USD:

The wave structure for GBP/USD has become clearer. Currently, the instrument has formed three waves down, while EUR/USD has formed five. Consequently, the British pound may limit itself to building a corrective structure, and both currency pairs may begin forming upward segments of the trend. At this moment, this is merely an assumption, but it is a probable one. If it holds true, the instrument will start rising with targets located around the 35 figure and above. Market participants currently have a good opportunity to buy.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often lead to changes.
2. If there is no confidence in what is happening in the market, it is better not to enter it.
3. There is never such a thing as 100% certainty in direction—there never will be. Don't forget about protective Stop Loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.