Recently, we have learned a lot about the upcoming Federal Reserve meeting in December. Almost all FOMC governors have spoken, and the market has come to realize that Jerome Powell has once again been right. At the last meeting, the Fed president clearly stated that a rate cut in December is by no means guaranteed. Subsequently, a majority of the FOMC Committee confirmed his words, saying they lean toward a pause until new evidence of a labor market slowdown emerges. Thus, the direction for the Fed's December meeting is now more or less clear. The baseline scenario is a pause until economic data necessitate otherwise.

And what about the European Central Bank? The situation with the ECB is even clearer. Inflation in the Eurozone has decreased to the necessary 2%, which means that the ECB will not consider rate cuts at upcoming meetings. However, by 2026, conditions may arise that warrant a change in monetary policy. ECB President Christine Lagarde indirectly communicated this.

Lagarde hinted that the market underestimates the new U.S. tariff policy. According to Lagarde, many importers and exporters are currently trying to minimize the negative impact of tariffs on end consumers by reducing their own profit margins. In other words, it is the intermediaries between producers and consumers who are bearing the burden of Trump's tariffs. However, Lagarde notes that this situation will not last forever. Sooner or later, importers and exporters will start passing the burden of tariffs on to end buyers, and inflation could jump worldwide.

What happens if inflation in the Eurozone starts to rise again is clear. The ECB will be forced to tighten monetary policy. I want to emphasize that the time lag between the end of the easing cycle and the beginning of tightening will be significant enough to make this scenario a reality. For example, a Fed rate hike in December or early next year is simply not expected, even if U.S. inflation spikes to 3.5-4.0%.

Therefore, under ceteris paribus conditions, the ECB will be the closest to implementing monetary policy tightening in 2026. This is another "plus" for the euro's karma.

Wave Picture for EUR/USD:

Based on the conducted analysis of EUR/USD, the instrument continues to build a bullish section of the trend. In recent months, the market has paused, but Donald Trump's policy and the Fed remain significant factors influencing the U.S. dollar's future decline. The targets for the current trend section may reach the 25-figure mark. At this time, an upward wave structure may begin to form. I expect that, in the range 1.1541–1.1587, the third wave of this structure will initiate, which may be either leading or more complex. In any case, in the coming days I will consider buying with targets around 1.1740.

Wave Picture for GBP/USD:

The wave structure of the GBP/USD instrument has changed. We continue to deal with a bullish, impulsive section of the trend, but its internal wave structure has become complex. Wave 4 has taken on a three-wave form, and its structure appears very elongated. The downward corrective structure a-b-c-d-e in wave 4 looks quite complete. If this is indeed the case, I expect the main trend section to resume its formation with initial targets around the 38 and 40 figures. The key is for the news flow from the U.S. to be on the dollar's side.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play, as they often bring about changes.
2. If there is market uncertainty, it is better not to enter.
3. There is no absolute certainty in the direction of movement, and there never can be. Remember to use protective orders, such as Stop-Loss Orderses.
4. Wave analysis can be combined with other types of analysis and trading strategies.