At the beginning of last week, Donald Trump first announced the imminent end of the war and that Iran was ready to accept most of the US conditions. It is unclear who Trump is negotiating with, as all Iranian officials have denied it. Nevertheless, Trump continues to insist that he has found "the right people" who are "much smarter than previous leaders." Who these people are remains a mystery. Last Monday, the markets believed Trump. Oil prices immediately plummeted, and the dollar stopped rising as rapidly. However, in the following days of the week, demand for the US currency increased again, while oil prices rose once more.

This week, the situation practically repeated itself. The authoritative Wall Street Journal obtained serious insider information suggesting that Trump is prepared to end the war and abandon the idea of lifting the Strait of Hormuz blockade. Allegedly, Trump wants the Strait to be managed by some international organization, but I somehow believe that in Iran, they couldn't care less about what Trump wants. Over and over again, information from the American president has been difficult to correlate with reality on the ground.

Nonetheless, demand for US currency began to decline on Tuesday, even overnight, while oil... only dropped $2 per barrel during the day. It turns out the oil market didn't believe Trump, while the currency market did. In my opinion, the answer lies elsewhere. Participants across all markets see the reality in the Middle East: the Strait of Hormuz is blocked, Iran is not going to lift the blockade, and if new strikes are made against its facilities, it will respond in kind, just as before. Additionally, military ships with ground troops continue to arrive in the Persian Gulf region, and Trump, in other comments, has stated that he would like to take control of Iranian oil and destroy Kharg Island, which serves as a crucial oil hub for exports. Therefore, I believe there is still no end in sight for this conflict. The facts suggest otherwise.

Given all of the above, I believe the current situation is due to a correction and to the inflation report for the Eurozone. A corrective wave in the euro and the pound has been brewing in recent days, and no one is currently expecting strong growth from either. Inflation in the EU rose by only 0.6% in the first month of the war, so the ECB's tightening of monetary policy is becoming a very real prospect.

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) and, in the short term, has completed the formation of a downward wave set. Since the five-wave impulse structure is complete, my readers can expect an increase in quotes in the coming week or two, with targets around 1.1666 and 1.1745, corresponding to 38.2% and 50.0% on the Fibonacci. Further movements of the instrument will fully depend on events in the Middle East.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become clearer over time, as I anticipated. Now we see a clear five-wave downward structure with an elongation in the third wave on the charts. If this is indeed the case, and geopolitics does not cause a new collapse of the instrument in the near future, we can expect the formation of at least a three-wave corrective structure within which the pound could rise to the 35-36 figures. Therefore, I believe now is a good time to buy.

Key Principles of My Analysis:

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