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The EUR/USD currency pair traded very sluggishly and weakly on Tuesday. At the beginning of this week, the pair's volatility dropped to minimal levels, reflecting the market's attitude towards events around the world right now. The macroeconomic backdrop has been ignored for three consecutive months, but there were simply no important publications in the first half of this week. The fundamental backdrop is absent as markets prepare for upcoming central bank meetings, expecting surprises. The flow of geopolitical news continues unabated, and the market is no longer reacting to it. The abundance of contradictory geopolitical information has become tiresome for the entire world. Every day, there are reports that "the deal is almost agreed upon," "the Strait of Hormuz will be opened soon," and literally a few hours later—"Donald Trump is in no rush to sign the deal," "Trump believes that no deal is better than a bad deal," "the U.S. has launched new strikes against Iran." This summarizes the essence of what has been happening in the world and the Middle East recently.
Tuesday was no exception. The U.S. president once again stated that progress is being made in negotiations, and just a few hours later, it became known that U.S. forces struck Iranian launch sites and boats that were "laying mines in the Strait of Hormuz." This occurred just a few days after Tehran and Washington agreed to extend the ceasefire for another 60 days—a ceasefire that has already been violated at least four times. This is all you need to know about the "ceasefire between Iran and the U.S."
The U.S. Central Command declared that the strikes on Iranian facilities and boats were carried out in self-defense. A classic of the 21st century. "We attack you in the name of self-defense." Interestingly, the currency market did not react to this event; the dollar did not strengthen, and oil prices rose only slightly. The markets have simply stopped responding to geopolitics. Traders are tired of sorting through hundreds of contradictory reports each day, which prevents them from drawing clear, plausible conclusions. Therefore, the markets now prefer not to panic in making buying or selling decisions, but rather to wait. Wait for Tehran and Washington to tire of their war and negotiations, and for them to at least reach an agreement on something; once the parties sign a deal, it can be analyzed and acted upon.
As a result, the euro has remained stagnant for several consecutive days. From current positions, the EUR/USD pair can either begin a new upward trend that will be part of the global trends of 2022 and 2025 or continue the current downward trend, supported only by disappointing geopolitics in the Middle East. As before, the dollar has no supporting factors other than the unstable situation in the Persian Gulf. If a full-scale war does not resume, we do not expect the American currency to strengthen.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of May 27 is 46 pips and is characterized as "medium-low." We expect the pair to trade between 1.1580 and 1.1672 on Wednesday. The upper channel of the linear regression has turned upward, indicating a shift in the trend to the upside. In fact, the upward trend for 2025 could have resumed as much as a month ago. The CCI indicator has entered the overbought zone and formed two "bearish" divergences, signaling the start of a downward correction that is still underway.
S1 – 1.1597
S2 – 1.1536
S3 – 1.1475
R1 – 1.1658
R2 – 1.1719
R3 – 1.1780
The EUR/USD pair continues its downward movement, which is likely a correction within the broader global upward trend. The global fundamental backdrop for the dollar remains extremely negative, and only geopolitical factors regularly support it. When the price is below the moving average, short positions can be considered with targets at 1.1580 and 1.1536. Above the moving average line, long positions remain relevant with targets at 1.1780 and 1.1841. The market has been moving away from geopolitical factors, but in recent weeks, the dollar has been in demand as market hopes for peace in the Middle East have weakened.
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