Forex Analysis & Reviews: 30.11.2023 - Michelle Bowman is ready to...

30.11.2023 04:16 AM

Michelle Bowman is ready to support a rate hike

The US dollar continues to go through challenging times. I cannot say that it is somehow related to the news background, as many colleagues-analysts believe. In my opinion, the main reason for the dollar's fall lies in wave analysis. I would like to remind you that currently, the construction of a corrective wave 2 or b is ongoing for both instruments. In both cases, this wave already constitutes 61.8% according to Fibonacci. This means that the probability of its completion in the near future is very high.

Let's return to the news background. In recent weeks, we have seen many reports from the US that were weaker than market expectations. Many important reports were significantly weaker than market expectations. But at the same time, there were positive reports that the market ignored. The closest example is Wednesday's US inflation data. In addition to this, some members of the FOMC still support the tightening of monetary policy, although they only talk about it in the context of the new acceleration of US inflation.

One of the most well-known representatives of the Federal Reserve, Michelle Bowman, said that she would support a new interest rate hike if inflation data start to show growth again. She is also ready to vote for a rate hike if it turns out that the current level is not enough to return to 2%. This is certainly not the hawkish sentiment that would be enough for the dollar to experience strong growth, but I want to remind you that members of the ECB Governing Council are not currently talking about a new rate hike either.

It follows that the only reason for a decrease in demand for the dollar could be economic statistics from the United States. But even if the report doesn't turn out to be a complete disappointment, the dollar still falls. It seems that the greenback is living its own life, and the market is not interested in it. In conclusion, I believe that it would be premature to reject the main scenario with the construction of wave 3.

Based on the analysis, I conclude that a bearish wave pattern is still being formed. The pair has reached the targets around the 1.0463 mark, and the fact that the pair has yet to breach this level indicates that the market is ready to build a corrective wave. It seems that the market has completed the formation of wave 2 or b, so in the near future I expect an impulsive descending wave 3 or c with a significant decline in the instrument. I still recommend selling with targets below the low of wave 1 or a. But be cautious with short positions, as wave 2 or b may take a more extended form. The best decision would be to refrain from selling until signs of the completion of 2 or b appear.

The wave pattern for the GBP/USD pair suggests a decline within the downtrend segment. The most that we can count on is a correction. At this time, I can already recommend selling the instrument with targets below the 1.2068 mark because wave 2 or b will eventually end and at any time. The longer it takes, the stronger the fall. The narrowing triangle is a harbinger to the end of the movement. However, I still recommend waiting for signals indicating the end of the corrective wave.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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