The EUR/USD currency pair traded relatively weakly on Tuesday, which is not surprising given the complete absence of any news. We are no longer inclined to discuss geopolitical news, as the information space is filled with nothing but rumors, conjectures, personal opinions, and so on. In reality, the situation surrounding Iran has not changed for about two weeks. The Strait of Hormuz remains blocked on both sides and by both parties to the conflict, and oil prices are rising again, as, instead of peace talks, the markets received another setback, with Iran and Washington unable to even agree on a personal meeting. Thus, we will not comment on the barrage of recent news regarding the Iranian-American conflict, as there are simply no updates.
We also do not believe the U.S. dollar has been strengthening recently due to a weakening of market optimism about the conflict in the Middle East. The EUR/USD pair (and GBP/USD as well) had been rising for two weeks straight, reflecting a temporary ceasefire that remains temporary a month later. After that, there was a standard technical correction. Traders began taking profits on purchases formed on expectations of an imminent truce, causing the euro to decline slightly while the dollar rose a bit.
As we have said many times, there's no need to try to explain every 50-pip movement in the pair with fundamental or macroeconomic events. Often, the reason lies in simple supply and demand. Someone opened a large position, and someone closed a large position; this doesn't require geopolitical or fundamental justifications. Currency exists not only for profit-oriented speculation. It is also used as a means of settlement and payment. If a major bank needs a large amount of dollars, it enters the market and buys. Traders see the dollar rising and immediately conclude that "geopolitics is bad, and the market no longer believes in a truce between the U.S. and Iran." They then await further declines in the EUR/USD pair...
This week, three central bank meetings are scheduled; however, unlike many analysts, we believe all three will prove inconsequential. Recent meetings of central banks and important macroeconomic reports have been ignored by the market. Central banks are currently not ready for any changes in monetary policy, as no one understands how events in the Middle East will unfold. In March, inflation worldwide surged due to uniform pricing for fuel, oil, and gas. However, if the conflict is resolved tomorrow, inflation will begin to slow down. If tomorrow Trump orders the bombing of Kharg Island or Iranian power plants, and Yemen blocks the Bab-al-Mandab Strait, the current energy crisis will seem like a "flower." The world will need to start preparing for "fruits." Thus, we do not expect a strong market reaction to the central bank meetings.
The average volatility of the EUR/USD currency pair over the last five trading days as of April 29 is 54 pips, characterized as "average." We expect the pair to trade between 1.1657 and 1.1765 on Wednesday. The upper linear regression channel has turned downward, indicating a shift to a downward trend. However, the upward trend of 2025 could resume. The CCI indicator entered the overbought area and formed a "bearish" divergence, warning of a downward pullback.
Nearby support levels:
S1 – 1.1658
S2 – 1.1597
S3 – 1.1536
Nearby resistance levels:
R1 – 1.1719
R2 – 1.1780
R3 – 1.1841
Trading Recommendations:
The EUR/USD pair maintains an upward trend amid the weakening influence of geopolitics on market sentiment and a decrease in geopolitical tensions. The global fundamental background for the dollar remains extremely negative; therefore, in the long term, we still expect the pair to rise. When the price is below the moving average, short positions can be considered with targets of 1.1658 and 1.1597 on technical grounds. Above the moving average, long positions are relevant with targets of 1.1790 and 1.1841. The market is distancing itself from the geopolitical factor, while the dollar is losing its only growth driver.
Explanations of Illustrations:
Linear regression channels help to define the current trend. If both are directed in the same way, it means the trend is currently strong;
The moving average line (settings 20,0, smoothed) determines the short-term trend and the direction in which trading should currently be conducted;
Murray levels are target levels for movements and corrections;
Volatility levels (red lines) indicate the probable price channel in which the pair will operate over the next day, based on current volatility readings;
The CCI indicator – its entrance into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction may be approaching.
