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The EUR/USD currency pair again failed to show any interesting moves on Friday and, moreover, no correction. Thus, the euro remains at its 2026 low. The only thing preserving some prospects for recovery by year-end is that all of 2026's decline is a weekly-timeframe correction within a larger uptrend. The market is ignoring the macroeconomic, fundamental, and geopolitical backdrop that often supports the euro rather than the dollar. If the market ignores factors that support the euro, how can one expect it to rise? On Friday, the US University of Michigan consumer sentiment index was published and came in lower than forecast. However, the report offered no support for the euro. Then again, we did not expect the dollar to collapse on that report, given that the market effectively ignored the disappointing Nonfarm Payrolls and unemployment figures a week earlier. This week the US inflation report will be released, which will determine the fate, if not of the October Federal Reserve meeting, then of the December one. The market will look for inflation to accelerate before resuming buying the US currency.
Technically, the downtrend formation continues. The market has been buying the dollar for the fifth consecutive week. The trendline remains relevant; price sits below the Ichimoku lines, so the pair's decline is entirely logical from a technical perspective. Expecting euro recovery makes sense only after the trendline is breached.
On the 5-minute timeframe, two trading signals were formed on Friday. First, the pair broke through the 1.1221–1.1223 area from below to above, and then from above to below. In both cases, price moved at least 15 pips in the intended direction. The second sell trade yielded a profit of 15–20 pips if traders closed it before the end of the day.
The latest COT report is dated October 6. The weekly timeframe illustration clearly shows that the net position of non-commercial traders remains "bearish" and has declined significantly in 2026 due to geopolitical events. Traders have been reducing euro exposure in favor of the US dollar over the past six months. Donald Trump's policies have not changed, but the dollar has long served as a "reserve" currency.
However, we still do not see any fundamental factors that would further strengthen the US currency. The war in the Middle East made the dollar temporarily super-attractive, and the Fed's monetary policy stance surprised the dollar for the second time this year. In the long term, the euro could fall as low as $1.08 (the trendline), but the uptrend will remain relevant. Yet in recent weeks the market accounts only for positive factors for the dollar and ignores everything else.
The positioning of the red and blue indicator lines points to an approximate parity between bulls and bears. During the last reporting week, long positions in the "Non-commercial" group increased by 4,800, while shorts rose by 40,900. Accordingly, the net position decreased further by 36,100 contracts over the week.
On the hourly timeframe, EUR/USD continues to form a downward trend. The Fed greatly aided the development of the downward trend, but that factor is unlikely to explain dollar strength several weeks after the meeting. The European Central Bank should have supported the euro, having already raised rates twice in 2026, and US labor market data should have crushed the dollar altogether. But the market now sees no factors supporting the euro. Thus, the dollar continues to form a strong trend that now depends only on market sentiment.
For October 12 we highlight the following levels for trading — 1.1092, 1.1147, 1.1221, 1.1274, 1.1362–1.1368, 1.1461–1.1473, 1.1536–1.1542, 1.1585, 1.1657–1.1665, as well as the Senkou Span B line (1.1285) and Kijun-sen (1.1222). The Ichimoku indicator lines may move during the day, so account for this when determining trading signals. Don't forget to move Your Stop Loss to breakeven if price has moved 15 pips in the right direction. This will protect against potential losses if the signal proves false.
On Monday, no major events are planned in the Eurozone or the US, so we are likely in for a boring Monday with low volatility and sideways movement.
Traders may consider targets for short positions near 1.1147 if price rebounds today from the 1.1221–1.1222 area. In case of a trendline breakout, consider targets for long positions at 1.1285 and 1.1362–1.1368.
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