What to do with the Federal Reserve's puzzle of three "points of contention" remains unclear even now, when the probability of a rate cut in September stands at 100%, according to the CME FedWatch tool. If inflation does begin to rise, as many economists believe, lowering the rate would be tantamount to abandoning the price stability mandate. Easing policy amid rising inflation would only accelerate it further. At the same time, failing to cut the rate is also not an option, as the labor market may continue to "cool," which would mean rising unemployment.

On top of this, Donald Trump is demanding an immediate 3% rate cut, is already looking for a replacement for Jerome Powell, will soon appoint a new FOMC member to replace the resigned Adriana Kugler, and Treasury Secretary Scott Bessent believes the rate should be lowered by 150–175 basis points in the near term. Meanwhile, an internal investigation against Powell is ongoing over excessive spending of U.S. taxpayers' money on Federal Reserve building renovations. Powell is accused of fraud, perjury, and deliberately misleading the U.S. Congress. In any case, Powell will leave his post in nine months.

I believe that such a conundrum cannot work in favor of the U.S. currency. The question is how aggressively and quickly the Fed will ease policy. But in any case, this will mean a shift toward a more dovish stance in the very near future. Since the European Central Bank and the Bank of England currently have no grounds to launch a new round of easing, the FOMC will be cutting rates "in splendid isolation."

Based on this, demand for the U.S. dollar is highly likely to continue declining. Of course, one should not forget other global currency market factors that could reverse the trend. The trade war will eventually end. The military conflict in Ukraine could move toward de-escalation as early as tomorrow. The U.S. currency does have certain chances, but for now, it is difficult to regard those chances as real opportunities.

Wave pattern for EUR/USD:

Based on my EUR/USD analysis, I conclude that the instrument continues building an upward trend segment. The wave pattern still depends entirely on news related to Trump's decisions and U.S. foreign policy. The targets for this trend segment may extend as far as the 1.25 level. Therefore, I continue to consider buying with targets near 1.1875, which corresponds to 161.8% Fibonacci, and higher. I assume that wave 4 has been completed. Accordingly, now is a good time for buying.

Wave pattern for GBP/USD:

The wave pattern for GBP/USD remains unchanged. We are dealing with an upward, impulsive trend segment. Under Trump, markets may face many more shocks and reversals, which could significantly affect the wave pattern, but at present, the working scenario remains intact. The targets for the upward trend segment are now located near 1.4017. At the moment, I assume that the downward wave 4 has been completed. Therefore, I recommend buying with a target of 1.4017.

Key principles of my analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to trade and often change.
2. If you are not confident about the market situation, it is better to stay out.
3. There can never be 100% certainty about the direction of movement. Always remember to use protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.