07.05.202604:23 Forex Analysis & Reviews: EUR/USD Overview. May 7: Trump Retreats Without Backing Down

On Wednesday, the EUR/USD currency pair began a new wave of upward movement, potentially marking the starting point of a new upward trend that started about a month ago. It's worth reminding ourselves of the key points of our analysis. First, despite the war in Iran, we never believed that the long-term trend could shift in favor of the dollar. On both the daily and weekly timeframes, the upward trend was not broken, even in March, and was not on the verge of breaking. Second, the US dollar was fortunate in the first quarter of 2026 that Trump initiated a full-fledged war in the Middle East. Many traders and investors immediately recalled that the dollar was once considered a "safe haven," which led to a two-month rally in the American currency. However, the geopolitical factor is typically only relevant at the onset of a geopolitical conflict. After that, the market and the world adjust and stop paying attention. It's worth noting that the conflict between Ukraine and Russia (which initially also triggered significant fluctuations in financial and energy markets) has been ongoing for five years now. Most traders no longer even recall it.

However, the most crucial point became clear during the process. Donald Trump began the military operation in Iran with a bang, launching strikes almost daily while hoping that EU countries would join his war effort. Trump aimed to isolate Iran completely so that it would have no choice but to sign an agreement favorable to the US. But Iran held firm. Moreover, Trump now faces an unflattering prospect of losing elections in Congress in November 2026, which would prevent him from making decisions unilaterally. The longer the conflict drags on, the more Trump's ratings drop, and consequently, those of the entire Republican Party. Americans are clearly dissatisfied with rising fuel prices and the costs of goods and services that depend on that fuel. The culprit was not difficult to identify. Most Americans still do not understand why the war in Iran was necessary in the first place.

Thus, on one hand, Trump presented a list of demands to Iran and imposed an oil blockade, while on the other hand, he found himself forced to consider how to conclude the conflict rather than escalate the violence in the Middle East. On Monday, when American ships attempted to pass through the Strait of Hormuz and were attacked by Iranian missiles, markets began to brace for a renewed war. However, on Wednesday, it became known that the missile attacks on American destroyers were "not sufficient to resume hostilities." In simple terms, Washington indicated that it is fully satisfied with the oil blockade of Iran but does not want to resume active hostilities. Trump retreated while maintaining pressure on Iran. On Wednesday, the American president also uttered the significant phrase, "We are on the home stretch towards finalizing a deal with Iran." As a consequence, the US dollar is falling again because the war has not resumed, and Trump is now focused on signing a peace agreement. Iran, on its part, has no choice but to meet Washington halfway.

The average volatility of the EUR/USD currency pair over the last five trading days as of May 7 is 74 pips, which is considered "average." We expect the pair to trade between 1.1674 and 1.1822 on Thursday. The upper linear regression channel has turned downward, indicating a shift towards a bearish trend. However, in fact, the upward trend of 2025 may resume. The CCI indicator has entered overbought territory and formed two "bearish" divergences, signaling the start of a downward correction.

Nearest Support Levels:

S1 – 1.1719

S2 – 1.1658

S3 – 1.1597

Nearest Resistance Levels:

R1 – 1.1780

R2 – 1.1841

R3 – 1.1902

Trading Recommendations:

The EUR/USD pair maintains an upward trend amid weakening geopolitical influence on market sentiment and declining geopolitical tensions. The global fundamental background for the dollar remains extremely negative, so in the long term, we still expect the pair to rise. If the price is below the moving average, short positions can be considered with targets at 1.1658 and 1.1597 based on technical grounds. Above the moving average line, long positions are relevant with targets at 1.1822 and 1.1841. The market continues to drift away from geopolitical factors, and the dollar is losing its only growth driver.

Explanations for the Illustrations:

• Linear regression channels help determine the current trend. If both are pointing in the same direction, it indicates a strong trend.
• The moving average line (settings 20,0, smoothed) determines the short-term trend and the direction in which trading should be conducted.
• Murray levels – target levels for movements and corrections.
• Volatility levels (red lines) – indicate the probable price channel in which the pair will spend the upcoming day, based on current volatility metrics.
• CCI Indicator – its entry into the overbought (above +250) or oversold (below -250) areas signals that a trend reversal is approaching in the opposite direction.