FX.co ★ Trump wants to end war with Iran but does not know how

Although the Strait of Hormuz remains effectively blocked and hostilities between Iran and the US continue, Donald Trump is searching for a way out of the situation. For the US president there are only two politically viable exit routes—declare a complete victory over the opponent and end the fighting, or declare victory and "freeze" the conflict. I wrote about both scenarios all summer, so this news contains nothing new for me. Trump cannot leave the conflict having lost, so declarations of victory are inevitable. At the same time, he realizes there is no point in maintaining military pressure on Iran, because six full months of operations have produced no decisive results. Therefore, it is likely he will now shift public attention toward the Ukraine–Russia conflict, try to wrap that up in the coming months, and then reappear as a peacemaker.

I should also remind readers that only a few weeks ago Trump announced an "economic blockade" of Iran, which, in his formulation, was supposed to be voluntarily adopted by all Tehran's trading partners—notably China, Turkey, and Iraq. Of course, none of those countries supported Trump's plan, which was clearly tailored to his personal ambitions and objectives. There was no benefit for China or Turkey in following the US plan. In today's world no state does anything "for free." Trump understood that from the start and defaulted to his preferred tools of pressure—sanctions and tariffs. But the world no longer fears Trump or his tariffs, which largely harm the US economy more than anyone else's. China immediately threatened retaliatory duties and restrictions, and for two weeks now we have heard nothing more about the economic blockade of Iran. It seems Trump himself has already forgotten the idea.

Analysts have again emphasized that none of the declared objectives of Trump's military campaign in the Middle East has been achieved. Worse, the strikes have left the Strait of Hormuz effectively blocked, and no one knows when it will reopen. In short, Trump's actions have made things worse—for the world, and including the United States. US fuel costs continue to rise, and the Republican Party's prospects in the midterms are falling at the same pace. Trump's approval ratings keep posting new lows, so he urgently needs to end the war without having achieved anything.

Pay attention to my other articles:

EUR/USD analysis, September 7. Strong nonfarm payrolls and strange reaction

Wave analysis of EUR/USD

Based on my analysis of EUR/USD, I conclude the instrument remains within a local upward segment of a larger first wave in a new global bullish phase. Admittedly, the trend that began in January could take the form of an A-B-C-D-E structure. If that alternative plays out, declines will resume toward targets below wave C's low at 1.1325. I treat that as an alternative scenario. My base view is that a new extended bullish segment began in June that will carry the euro back toward the 1.20 area and substantially above it.

Wave analysis of GBP/USD

The wave structure for GBP/USD is reasonably clear but could become more complex. Charts show a distinct corrective A-B-C structure that has been completed, so I expect an impulsive series of upward waves to unfold. However, doubts in the EUR/USD wave count mean the euro could still adopt a five-wave down structure, which would likely drag GBP/USD toward the 1.31 area and require a revision of the pound's wave labelling. For now, that is a reserve scenario.

Core principles of my analysis

1) Wave structures should be simple and intelligible; complex structures are hard to trade and prone to change.

2) If you lack confidence in what the market is doing, it is better not to trade.

3) There is never 100% certainty in direction—always use protective stop-loss orders.

4) Wave analysis can and should be combined with other analytical methods and trading strategies.