FX.co ★ The Best Solution for Everyone is a Freeze

A freeze of the conflict in the Middle East now appears not just as the best scenario but as the only possible scenario. Washington cannot achieve a "nuclear deal" with Tehran through military means, and it simply cannot sustain a war indefinitely. Recent news and events have shown that the arsenal and munitions of the US military are not limitless, and the US Senate, even in its current composition, is reluctant to provide Trump with additional funding. Most of the "Patriot" and "Tomahawk" missiles have been used up, and producing new ones requires not only huge amounts of money (each missile costs between $4 to $6 million) but also several years for their creation. The US cannot afford to use its entire missile stockpile, as doing so would leave it defenseless against threats from North Korea or China. Consequently, continuing the war with Iran is becoming increasingly problematic.

Donald Trump clearly hoped for a blitzkrieg similar to the operation in Venezuela. A few days or even weeks of missile ammunition would have sufficed. However, at the current moment, America has conducted over 13,000 strikes against Iran, and its economy is not on military rails like Iran's. In other words, Iran has been producing missiles, drones, and military facilities for decades as it has lived in a state of war. The US is a different matter. It has a stockpile of weapons, but producing new ones requires money. It is worth noting that very few people in the US understand why Trump initiated the war in the Middle East.

Based on all of the above, Trump cannot, and will not, continue fighting at full strength in the near future. So what is left in this case? The leader of the White House cannot acknowledge defeat. Declare victory and leave? That's an option. But easier than that is to freeze the conflict. This means the conflict will remain unresolved, and no one will work on resolving it for now. At least until the US replenishes its munitions. Certainly, this is a temporary pause that benefits not only the US but also Iran. After all, Iran is also not sitting idly and will certainly be preparing for a new battle. In my view, the situation is completely deadlocked, and there is no way out. It may only change after the midterm elections in the US Congress.

Wave Picture for EUR/USD:

Based on the analysis of EUR/USD, I conclude that the instrument remains within an upward trend, while in the shorter term it is within a downward trend. In my opinion, now is a good time to try to form long positions, but the instrument may still drop to the 13th figure within wave 5 in C. Wave analysis often brings surprises, so I would start shifting towards buying now.

Wave Picture for GBP/USD:

The wave picture for the GBP/USD instrument has become quite complex. Currently, the instrument has formed three downward waves, while EUR/USD may have five waves. Consequently, the pound may form another downward wave, similar to the euro, but this wave could be the second within a new upward trend section. Thus, the divergence in wave patterns between the euro and the pound will exist but be insignificant. Given this, the downward retracement may continue for some time, after which I expect the formation of wave 3 of the new upward trend, with targets around the 37-38 level.

Key Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to play out; they often undergo changes.
2. If there is no confidence in what is happening in the market, it is better not to enter it.
3. There is never and can never be 100% certainty about direction. Don't forget about protective stop-loss orders.
4. Wave analysis can be combined with other types of analysis and trading strategies.