The US currency is facing challenging times. Over the past few weeks, demand for the US dollar has significantly declined, mostly due to US data. All of the most important reports turned out to be weaker than market expectations. Therefore, even the Federal Reserve's firm hawkish stance could not help the US dollar. So the question is, what's next? Will the US currency continue to decline, and will the current wave picture for both instruments be broken?

The US will publish a few important reports. Simply because over the past two weeks, all the most important indicators have already been published. I will highlight the University of Michigan Consumer Sentiment Index, which will be released on Friday, while all other reports are too insignificant for the market and the dollar. Despite such a pessimistic picture, I still believe that waves 3 or c will be completed. The market has been reacting to weak US data for several weeks now, but if there are no reports in the next five days, there will be no reasons for new short positions on the dollar.

The recent rise in quotes is not so terrible as to cause panic. The dollar has had a few bad weeks, but let me remind you that the situation in the European or British economy is even worse. For instance, the European Central Bank will already begin the process of easing monetary policy in June, which is a bearish factor for the euro. The Bank of England is unlikely to signal an imminent rate cut, but it won't talk about tightening either. Therefore, I maintain cautious optimism.

For the euro – an important Fibonacci level of 76.4% has been played out. An unsuccessful attempt at a breakout has already occurred, so quotes may fall in the upcoming week. For the pound – an important Fibonacci level of 38.2% has been played out as well. Another attempt at a breakout had also failed, so the British pound may start a new downward movement in the near future. At the moment, I see no reason to abandon the current wave pattern.

Wave analysis for EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that a bearish wave set is being formed. Waves 2 or b and 2 in 3 or c are complete, so in the near future, I expect an impulsive downward wave 3 in 3 or c to form with a significant decline in the instrument. I am considering short positions with targets near the 1.0462 mark, as the news background works in the dollar's favor. A successful attempt to break 1.0637, which is equal to 100.0% Fibonacci, will indicate that the market is ready for new short positions.

Wave analysis for GBP/USD:

The wave pattern of the GBP/USD instrument suggests a decline. I am considering selling the instrument with targets below the 1.2039 level, because I believe that wave 3 or c has started to form. A successful attempt to break 1.2472, which corresponds to 50.0% Fibonacci, indicates that the market is ready to build a descending wave.

Key principles of my analysis:

Wave structures should be simple and understandable. Complex structures are difficult to work with, and they often bring changes.

If you are not confident about the market's movement, it would be better not to enter it.

We cannot guarantee the direction of movement. Don't forget about Stop Loss orders.

Wave analysis can be combined with other types of analysis and trading strategies.