The American dollar has been feeling quite well in recent weeks, but the market is all about waves and cycles. After a bullish cycle, a bearish one follows, and trends depend on the strength of each cycle. For the EUR/USD instrument, we have seen a complete five-wave trend segment, so it is now permissible to expect the formation of a bullish segment. Can the American news background support the euro and pound against the dollar? Let's sort it out.

Last week, a considerable amount of important statistical data was released in America, but the market hardly noticed most of it. Only the Nonfarm Payrolls report garnered attention. Consequently, the market continues to filter many reports, and the dollar cannot count on strong support from economic data. This week in America, a May inflation report will be released, and only this report may elicit a market reaction similar to that of the Nonfarm Payrolls report. Market participants expect U.S. inflation to continue rising, bringing the Federal Reserve closer to tightening monetary policy. Core inflation is expected to spike from 4.2%, while the core rate may rise to 2.9%. If the actual figures turn out to be higher, it will further bolster the market's "hawkish" expectations. This is a supportive factor for the dollar. Therefore, for us to build a bullish wave set, we need inflation to at least remain within the projected range.

My readers may also pay attention to the PPI report on Thursday. This index will show how much producers have raised prices in May, which will naturally be reflected in subsequent inflation reports. The logic is the same: the higher inflation, the greater the chances of a further strengthening of the American currency.

In addition, the market will certainly continue to closely watch geopolitical developments. It is now even more interesting to see if Trump's latest promise of ending the conflict with Iran will materialize soon. So far, I see only regular rocket attacks in the region. However, if it happens, it will be much easier for the euro and pound to rise. The dollar still enjoys its status as a "safe haven," but aside from that, it currently has few strong advantages.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument remains within a bullish trend segment, while in the shorter term, it is within a downward trend segment that may already be complete. In my view, this is a good time to try to form long positions. An unsuccessful attempt to break the 1.1513 mark, which corresponds to 76.4% on the Fibonacci scale, combined with the completed appearance of the downward trend segment, suggests that the instrument will transition to forming a bullish wave set with targets around the 17 figure and higher.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become clearer. Currently, the instrument has formed three downward waves, while the EUR/USD instrument has formed five. Therefore, the pound may be limited to constructing a corrective structure, and both currency pairs may begin building bullish trend segments. At this point, it is only an assumption, but a probable one. If correct, the instrument will start rising with targets around the 35 figure and above. Market participants currently have a good opportunity to buy.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are difficult to play because they often require changes.
2. If there is uncertainty in the market, it is better not to enter.
3. There is no 100% certainty in the direction of movement, nor can there ever be. Do not forget about protective Stop Loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.