Forex Analysis & Reviews: 09.05.2025 - EUR/USD Analysis on May 9,...

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09.05.2025 07:19 PM

EUR/USD Analysis on May 9, 2025

The wave structure on the 4-hour EUR/USD chart has transformed into a bullish pattern. I believe there's little doubt that this shift was driven solely by the new U.S. trade policy. Until February 28, when the U.S. dollar began a sharp decline, the entire wave pattern clearly depicted a downtrend. What was unfolding was corrective wave 2. However, Trump's weekly announcements of various new tariffs had their impact. Demand for the U.S. currency plummeted, and now the entire trend segment that began on January 13 has taken on an impulsive upward form.

Moreover, the market was unable to form a convincing wave 2 within this bullish segment. Only a minor pullback occurred—one smaller than any corrective wave inside wave 1. Still, the U.S. dollar may continue to weaken unless Donald Trump makes a complete U-turn in his adopted trade policy. We've already seen an instance where a shift in the news backdrop altered the wave structure. A second occurrence is certainly possible.

The EUR/USD rate rose by 40 basis points on Friday. Price movement amplitude was extremely low due to a virtually empty news calendar. Over the past two weeks, the market digested a great deal of critical data, but ironically, it was yesterday—when there was no major data—that demand for the U.S. dollar picked up. This allowed for the development of a more convincing corrective wave 2 within the upcoming wave 3.

Despite the fact that the dollar has gained ground by various means in recent weeks, I currently have no doubt that we are dealing with a standard corrective wave. Of course, if Trump suddenly canceled tariffs for 75% of countries, cut duties for China, and signed trade agreements with everyone, demand for the dollar would soar—even though the current wave layout does not suggest a strong decline for the euro. But Trump has already reversed the trend once, and he could do it again.

In May, the news backdrop for the U.S. currency has been highly mixed. Most labor market, employment, and unemployment reports were weak, but the most important releases—unemployment and Nonfarm Payrolls—showed no deterioration for April. These, combined with the Fed's hawkish stance and Jerome Powell's resistance to Trump's pressure, likely helped the dollar recover somewhat. But the market is still awaiting news on Trump's trade war—whether positive or negative.

Summary

Based on my analysis of EUR/USD, I conclude that the pair continues to build a bullish trend segment. In the near term, the wave pattern will depend entirely on the stance and actions of the U.S. president. This must be kept in mind at all times. Wave 3 of the bullish segment is now forming, with its targets possibly extending into the 1.25 range. Reaching them will depend solely on Trump's trade policy. At this stage, wave 2 within wave 3 appears to be near completion. Therefore, I consider buying with targets above 1.1572, which corresponds to 423.6% on the Fibonacci scale.

On the higher wave scale, the structure has also shifted to a bullish layout. A long-term bullish wave set appears likely—but again, news directly from Donald Trump could turn everything upside down once more.

Core Principles of My Analysis

Wave structures should be simple and clear. Complex ones are hard to trade and are frequently subject to change.
If you're not confident in what's happening in the market, it's better to stay out.
There's never 100% certainty in the market's direction. Don't forget to use Stop Loss orders.
Wave analysis can be combined with other types of analysis and trading strategies.

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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.