The upcoming US news background will determine the fate of both EUR/USD and GBP/USD. As usual, there will be more news out of America than from the UK and Eurozone combined, since Donald Trump can make decisions at any moment that force FX market participants to react. Therefore, in the US, it's important to watch not only standard economic releases, but also newswires and Trump's social media accounts.

However, I can't know when the US president might announce new tariffs or sack another FOMC member. So let's concentrate on economic data. The first thing to note is the annual revision of Nonfarm Payrolls. It's not hard to guess that this revision happens once a year. There are no market forecasts for this indicator, but the past four months suggest the revision could be to the downside. This means the dollar faces a new labor market stress test already on Tuesday.

On Wednesday, the Producer Price Index (PPI) for August will be released. I don't usually focus on this number, but last month it jumped by 0.9%—0.6% above "normal." Most likely, August's increase will be smaller, but in any case, Thursday will bring the headline inflation report for August, which is what market participants are likely to wait for.

The consumer price index is expected to come in at 2.8–2.9% year-on-year for August—that is, a bit higher again. Inflation rising is at odds with the need for the Fed to cut rates, but let's admit inflation is indeed rising at a low pace. However, the main thing is that it's rising, not falling. In general, the Fed can't cut rates while inflation is rising, but now it no longer has a choice, since the US labor market has been "cooling" for four months in a row. Most likely, as long as Jerome Powell remains FOMC chair, the central bank will try to balance its two mandates. Achieving both price stability and full employment in the near future won't be possible, so the Fed will probably try to chase two rabbits at once.

I expect that demand for the US dollar will continue to decline in the new week.

Wave Structure for EUR/USD:

Based on my analysis, EUR/USD continues building an upward trend segment. The wave structure still depends entirely on news driven by Trump's decisions and US foreign policy. The trend targets may reach as high as the 1.25 area. Therefore, I continue to favor buys with targets around 1.1875 (the 161.8% Fibonacci level) and higher. I assume wave 4 is complete, so now is a good time to buy.

Wave Structure for GBP/USD:

The GBP/USD wave structure is unchanged. We are in a bullish, impulsive phase of the trend. Under Donald Trump, markets may see many shocks and reversals that could strongly impact the wave picture, but for now, the working scenario is intact. The targets for the bullish move are now around 1.4017. I believe the downward wave 4 is complete; wave 2 in 5 may also be complete or near completion. Thus, I recommend longs with a target at 1.4017.

Key Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are hard to trade and prone to change.
2. If you are unsure of the market, it's better to stay out.
3. You can never be 100% confident of price direction. Always use protective Stop Loss orders.
4. Wave analysis can (and should) be combined with other types of analysis and trading strategies.