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25.06.2025 07:10 PM
EUR/USD Analysis on June 25, 2025
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The wave pattern on the 4-hour chart for EUR/USD continues to indicate the formation of a bullish trend segment. Until February 28, when the U.S. dollar began to decline, the entire wave pattern looked like a convincing downward trend. A corrective wave 2 was unfolding. However, the trade war initiated by Donald Trump — aimed at increasing budget revenues and reducing the trade deficit — has so far worked against the U.S. currency. Demand for the dollar began to decline rapidly, and now the entire trend segment originating on January 13 has taken the shape of a bullish impulse.

At present, wave 3 within wave 3 is presumably continuing to form, and it may become much longer than it is now. If the current wave structure is correct, price increases will continue in the coming weeks and months. However, the U.S. dollar will remain under pressure only if Donald Trump does not completely reverse his trade policy. The chances of that are extremely low, but anything could happen on July 9. Realizing that his strategy is ineffective, Trump might unexpectedly reverse course, stating that he does not intend to cause harm.

The EUR/USD rate remained mostly flat by the start of Wednesday's U.S. session. There was virtually no news background today, except for Jerome Powell's second appearance in Congress in two days. Unsurprisingly, Wednesday's speech largely repeated the content of the first one. The key takeaway for the market: Powell still does not believe now is the right time to lower interest rates. It's worth noting that not all FOMC members share this view, but the hawks currently outnumber the doves.

Jerome Powell told lawmakers that the tariffs imposed by Trump will likely accelerate inflation in 2025. If that's the case, the FOMC cannot afford to resume easing monetary policy. The Fed's primary mandate remains price stability, which is why Powell prefers to wait for more certainty. If Powell had supported Trump's agenda, the U.S. dollar would likely have already declined further.

Meanwhile, the market continues to expect the rate-cutting cycle to resume this fall — something I personally doubt. Inflation in the U.S. is accelerating, indicating that there are underlying factors contributing to this trend. If Powell expects consumer prices to rise, he likely has good reason. Still, EUR/USD is showing a five-wave structure, which seems to be one of the internal waves within a larger wave 3. If this assumption is correct, the market may soon shift to forming a corrective wave or wave group — a development that could temporarily support the U.S. currency.

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Conclusions:

Based on the current EUR/USD analysis, I conclude that the instrument is continuing to build a bullish trend segment. The wave structure remains entirely dependent on the news background related to Trump's decisions and U.S. foreign policy — and there are still no positive changes. The targets for wave 3 could extend as high as the 1.25 level. Therefore, I continue to favor long positions with initial targets around 1.1708, corresponding to the 127.2% Fibonacci level. A de-escalation in the trade war could reverse the bullish trend, but at the moment there are no signs of reversal or de-escalation.

On the higher wave scale, it's evident that the wave structure has shifted to a bullish one. A long-term upward wave set may lie ahead — though the news flow, particularly from Donald Trump, could once again turn everything upside down.

Key principles of my analysis:

  1. Wave structures should be simple and clear. Complex structures are difficult to trade and often signal changes.
  2. If you're unsure of what's happening in the market, it's better to stay out.
  3. There can never be 100% certainty in the direction of movement. Always use protective Stop Loss orders.
  4. Wave analysis can be combined with other types of analysis and trading strategies.
Chin Zhao,
Analytical expert of InstaForex
© 2007-2025
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