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The EUR/USD currency pair continued its modest decline on Thursday, and in this article, we will analyze why the euro is falling while the pound is not. Overall, we can say that both the pound and the euro remain relatively stable—not just in the short term (the last two months), but also in the long term. Switching to the daily timeframe shows that the U.S. dollar has only managed another correction. Importantly, the EUR/USD pair has been unable to drop below 1.1440 during any correction over the past nine months, which marks the 23.6% Fibonacci retracement level. Thus, there is no talk of a long-term downward trend. Yes, we have observed sideways movement for the last nine months (with rare exceptions), but a flat trend can persist indefinitely. It is worth reminding traders that trending movements are sharp and fast, while flat trends are slow and weak.
As mentioned over the weekend, we anticipated a corrective decline for both the euro and the pound. The euro is indeed falling, but the British pound is holding steady. Why? In our view, the issue lies in energy and inflation. First and foremost, it should be remembered that the UK is far less dependent on external energy resource supplies than the European Union. This means that London has felt much more confident than Brussels over the past two months. Additionally, the recent inflation data in the UK shows an increase of only 0.3% in March, while in the eurozone it was 0.7%. Thus, the potential energy crisis triggered by Donald Trump has more serious consequences for the European economy than for the British one.
Furthermore, it is important to note that both pairs are currently influenced by technical factors. Geopolitics has faded into the background, allowing both the euro and the pound to recover in recent weeks. Additionally, there have been no significant geopolitical news items this week. The constant flow of alternating messages about the opening and closing of the Strait of Hormuz and the similar flow regarding negotiations in Pakistan are data that traders no longer react to. What is the point if there are up to ten contradictory messages coming in a single day?
The situation in the Middle East may heat up again, and that is a fact. Therefore, the necessity for a correction is somewhat supported by the current geopolitical situation. However, there have been no significant changes in the positions of the US and Iran around the Strait of Hormuz over the past seven days. Oil prices remain high, the Strait remains closed, and Tehran and Washington are still unable to reach any agreements, with Donald Trump continuing to exert any possible pressure on Iran.
Thus, we believe that the EUR/USD pair will continue to correct, but without serious negative news from the Middle East, the decline will not last long. The dollar has lost its sole support factor.
The average volatility of the EUR/USD currency pair over the last five trading days as of April 24 is 64 pips, which is considered "average." We expect the pair to trade between 1.1640 and 1.1768 on Friday. The upper channel of the linear regression has turned downward, indicating a trend change to bearish. However, there could actually be a resumption of the upward trend for 2025. The CCI indicator has entered overbought territory and formed a "bearish" divergence, signaling a downward pullback.
The EUR/USD pair continues its upward movement amid the weakening influence of geopolitics on market sentiment. The global fundamental backdrop for the dollar remains extremely negative, so in the long term, we still expect the pair to grow. When the price is below the moving average, short positions can be considered, with targets at 1.1658 and 1.1640 on technical grounds. Above the moving average line, long positions are relevant with targets of 1.1780 and 1.1841. The market gradually distances itself from the geopolitical factor, while the dollar loses its only growth driver.
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.
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