16.07.202604:30 Forex-elemzések és áttekintések: Overview of the EUR/USD Pair. July 16. What Did Kevin Warsh Say in Congress?

The EUR/USD currency pair continued to trade within a narrow sideways channel on Wednesday, which is clearly visible on the 4-hour timeframe. On Tuesday, inflation data for June was released in the United States, and traders had high hopes. On Tuesday and Wednesday, there were two speeches by the new head of the Federal Reserve, Kevin Warsh, in the U.S. Congress. The market also had great expectations for these events. However, what hopes did the market have, and were they justified?

In short, no. The hopes were not justified because the market did not initially understand what to expect. Let us remind you that a month ago, Warsh stated that inflation in the United States is too high, has been above the target level for five years, and "something needs to be done about it." However, Warsh did not disclose what should be done. Of course, the market immediately assumed that this referred to a tightening of monetary policy, raised its forecasts for interest rate hikes by the end of the year, and began preparing for a "hawkish" scenario. But then, unexpectedly, the conflict in the Middle East entered a phase of reconciliation, oil prices fell to pre-war levels, and, as a result, inflation in June decreased to 3.5%.

However, the further trajectory of inflation will largely depend on the geopolitics in the Middle East. If Iran and the U.S. re-enter an active phase of conflict, and the Strait of Hormuz is closed in the coming months, it is clear that oil prices will quickly return to above $100. Naturally, if such a scenario occurs, one cannot expect further decreases in inflation. And this is where it gets interesting. After the June Federal Reserve meeting, the market expected that Warsh would almost promise to raise the key interest rate before the congressmen. Better yet, several times in a row. These expectations were astonishing in their naivety.

Even if the Fed raises rates by the end of the year, Warsh does not currently know that. And no one knows, because no one in the world can predict how the conflict between Iran and the U.S. will unfold. If tomorrow Donald Trump announces that negotiations have resumed and Tehran and Washington have once again agreed to a ceasefire and the reopening of the strait, oil prices will naturally fall again, and inflation in July may also slow. In this case, why would the Fed need to raise rates? And the main question is: in conditions of complete geopolitical uncertainty, why should Warsh hint at/promise/speak about tightening policy that may not be necessary and that Trump opposes?

Therefore, it is absolutely predictable that the rhetoric of the Fed chairman did not differ from his speech a month earlier. The Fed is still in no hurry; inflation is high, but waiting is the best solution right now. The dollar was neither positively nor negatively affected by this information, and even the inflation report, which the market initially reacted to by selling dollars, quickly ceased to influence trader sentiment. Because the EUR/USD pair has been flat for the third week now! Neither the dollar nor the euro is increasing.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of July 16 is 56 pips, which is considered "average." We expect the pair to move between levels 1.1399 and 1.1511 on Thursday. The upper linear regression channel is directed downward, indicating the continuation of the downtrend. The CCI indicator entered the oversold zone and formed two "bullish" divergences, warning of a possible end to the downtrend.

Nearest support levels:

S1 – 1.1414

S2 – 1.1353

S3 – 1.1292

Nearest resistance levels:

R1 – 1.1475

R2 – 1.1536

R3 – 1.1597

Trading Recommendations:

The EUR/USD pair maintains a downtrend, which is presumably a correction within the global uptrend, clearly visible on the daily or weekly timeframe. The global fundamental backdrop for the dollar remains negative, but in 2026, first geopolitics and then the Fed's "hawkish" stance provided strong support for the U.S. currency. With the price below the moving average, shorts can be considered, targeting 1.1372 and 1.1353. Above the moving average line, long positions are relevant with targets at 1.1475 and 1.1536. Bears are maintaining winning positions, and the market has been flat for the third week.

Explanations for Illustrations:

Linear regression channels help determine the current trend. If both are directed in one direction, it means the trend is 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) represent the likely price channel in which the pair will move over the next day based on current volatility indicators;

The CCI indicator's entry into the oversold zone (below -250) or overbought zone (above +250) indicates that a trend reversal in the opposite direction is approaching.