TACO Out, NACHO In

In my recent reviews, I have repeatedly discussed the Strait of Hormuz blockade, potential reopening dates, conditions for reopening the strait, and the consequences of the blockade for the world. Unfortunately, these topics can be described as pessimistic not only for the markets but for the entire world. Simply put, positive news is scarce, and the market is gradually shedding its unbridled and unfounded optimism.

Most people have likely heard of the TACO principle. It posits that Trump always backs down. In practice, this looks like this: the US President threatens someone, makes ultimatums, but then either gets what he wants and backs down or does not get what he wants and also backs down. I would call this scenario, which repeats time and time again, not TACO, but rather just a typical poker bluff. Trump is a player at the poker table. The goal of the game is to defeat all opponents. Bluffing is one of the tools for victory.

The first year of the controversial Republican's presidency showcased the TACO principle in full swing multiple times. How many times did Trump threaten to impose new tariffs, leave NATO, start a military intervention, or seize certain territories? Every week. In this way, the American President "tests" his opponent. By the response, one can determine whether to expect a "piece of someone else's pie" or whether to change the target of attack.

Many countries around the world have shown that taking a piece of their pie is quite possible. Once Trump understood this, he would grab a piece twice as large. Not all governments backed down before the White House, and the TACO principle did not always work. But every time Trump backed down, he only confirmed the principle's effectiveness.

What does the NACHO principle entail? It states that the Strait of Hormuz will not reopen until the economic damage becomes critical. The question is—critical for whom? I remind you that the Strait of Hormuz is under blockade by the US and Iran. Iran has been accustomed to living in poverty for decades, without adequate healthcare, education, communication, and development. Thus, the loss of income from oil sales is a serious blow to it, but it will not be fatal enough to cause the country to fall, nor will Tehran rush to sign a deal on Trump's terms. The US is reaping enormous profits from increased oil and gas sales at inflated prices. One could argue that Washington benefits more from the Strait of Hormuz blockade than from a war in the Middle East.

Based on the analysis of EUR/USD, I conclude that the instrument remains within an upward segment of the trend (see the lower chart), while in the short term, it is within a corrective structure. The corrective wave setup appears to be quite complete and may take on a more complex, extended form. The geopolitical backdrop in the Middle East may cause a decline in the instrument in the near future, so caution is advised when buying. I expect the instrument to continue to rise with targets around the 19th figure.

The wave picture for the GBP/USD instrument has become clearer over time, as I anticipated. We now see a clear five-wave upward structure on the charts, which may be completed soon. If this is indeed the case, we can expect a corrective wave setup to form after wave 5 completes. Wave 5 may be completed around the 1.3699 mark, corresponding to 76.4% on the Fibonacci. If geopolitics continues to progress toward long-term peace, the bullish segment of the trend may take on a more extended form. Therefore, the combination of waves and geopolitical developments will determine the pound's fate in the coming weeks.