Forex Analysis & Reviews: 05.05.2025 - EUR/USD Analysis

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05.05.2025 06:06 PM

EUR/USD Analysis – May 5th. Trump's New Tariffs Fail to Impress

The wave structure on the 4-hour chart for the EUR/USD pair has transformed into a bullish one. I believe there's little doubt that this transformation is entirely due to the new U.S. trade policy. Until February 28, when the sharp decline of the U.S. dollar began, the entire wave structure appeared as a convincing downward trend, forming a corrective wave 2. However, Trump's weekly announcements of various tariffs have taken their toll. Demand for the U.S. dollar began to drop rapidly, and now the entire trend segment that began on January 13 has taken on an impulsive upward form.

Moreover, the market wasn't even able to build a convincing wave 2 within this segment. We saw only a minor pullback, smaller than the corrective waves within wave 1. Nonetheless, the U.S. dollar could continue its decline unless Donald Trump completely reverses his adopted trade policy. We've already seen one instance where news flow changed the wave structure. A second time is entirely possible.

The EUR/USD pair rose by 50 basis points on Monday. The amplitude of movements before the U.S. session was relatively low, but more volatile moves may appear before the end of the day. Today did not start with the U.S. ISM Services PMI, but rather with Trump waking up and deciding to introduce new tariffs. This time, the "liberation of America" targeted the film industry, which the U.S. president decided to impose import tariffs on—at a rate of 100%. Many might wonder, what does "import in film" even mean? The answer is quite simple. Trump believes that all movies filmed in America are American films and should be supported. Any film made—even by American companies—but shot abroad should be taxed as an import.

Frankly, this is starting to look like Trump is inventing tariffs without concern for whether they seem absurd. American companies will be paying tariffs for being unable to film the Sahara Desert in the U.S., and all foreign companies may be barred from distributing their films in the U.S. due to high tariffs. One might suppose the Oscars will soon become an exclusively American event. Nevertheless, that is the will of the leader. The current wave structure allows for the interpretation that the downward corrective wave has ended, so further appreciation of the euro and depreciation of the dollar can be expected. And watching all this unfold is becoming increasingly fascinating. Isn't it interesting to wonder what tariffs Trump will come up with next?

General conclusions

Based on my analysis of EUR/USD, I conclude that the pair continues to build a bullish trend segment. In the near future, the wave structure will be entirely dependent on the stance and actions of the U.S. president. This must constantly be kept in mind. Based on the wave pattern alone, I expected a three-wave correction within wave 2. However, wave 2 has already ended and took on a single-wave form. Wave 3 of the upward trend has begun, and its targets may extend as far as the 1.25 area. Reaching those targets will depend solely on Trump. At this point, we can assume that wave 2 in 3 is nearing completion. Therefore, I consider buying with targets above the 1.1572 mark, which corresponds to 423.6% on the Fibonacci scale.

On the higher wave scale, the structure has transformed into a bullish one. It is likely that we are facing a long-term upward trend, but the news flow—especially from Donald Trump personally—can once again turn everything upside down.

Core principles of my analysis:

Wave structures should be simple and clear. Complex structures are hard to trade and often undergo changes.
If you're not confident in the market situation, it's better to stay out.
There can never be 100% certainty in the direction of movement. Always use Stop Loss protective 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.