14.05.202604:00 Forex Analysis & Reviews: EUR/USD Overview. May 14. The Market Remains Fully Engaged in Geopolitics

The EUR/USD currency pair slid slightly in price on Wednesday, but the 4-hour chart shows the movements remain weak and corrective. The same conclusion can be drawn from the chart below—volatility over the last 5 days did not exceed 65 pips. This is certainly not too low, but it is also far from being very high. Thus, we are currently witnessing another wave of downward movement within what is, in practice, a sideways movement. Although the movements of the last few weeks cannot be labeled as a "flat," a clear trend is also absent. The market is constantly oscillating between buying and selling amid an ever-changing geopolitical backdrop, while macroeconomic and fundamental factors remain ignored.

A striking example is that in the last few days, several European Central Bank representatives have stated that the central bank may raise interest rates as early as June. This time, "may raise" indicates not a hypothetical possibility but a practically predetermined step. The problem is that inflation in the Eurozone continues to accelerate, and since Donald Trump is not looming over the ECB (as he is over the Federal Reserve), the ECB can fully carry out its mandates. Therefore, if the war in the Middle East does not end before early June and the Strait of Hormuz remains closed, the ECB's decision to tighten monetary policy can be considered made.

How did the market react to this news? Just as it did to the inflation report, labor market data, and unemployment figures in the US, meaning, hardly at all. Perhaps there was minimal market reaction, but since when do traders need to pore over charts for responses to such important reports?

Thus, we continue to believe the market is trading exclusively on geopolitical news, even as this factor's impact on the market has been weakening. In practice, this looks straightforward. Traders are still ready to respond to the most critical news, but they are no longer inclined to systematically buy dollars because the conflict is ongoing, may flare up anew, and the Strait remains blocked. Therefore, for a significant rise in the US currency, a resumption of war in the Middle East is required. Neither Trump nor Iran wants that. Consequently, we believe that the likelihood of the conflict transitioning into a prolonged, multi-month phase of negotiations while maintaining the status of a temporary ceasefire is the best available outcome in the current situation. There will be no peace without a deal. War is undesirable for everyone. The only way forward is to keep negotiating. Notably, Tehran and Washington have not made any statements about withdrawing from negotiations, meaning that talks will continue.

The market is currently in a state of anticipation. Negotiations are going well, but traders want to understand their current stance. Negotiations represent the absence of peace and the absence of war. Therefore, there are currently no grounds for either buying or selling the pair.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of May 14 is 55 pips, which is characterized as "average." We expect the pair to trade between 1.1658 and 1.1767 on Thursday. The upper channel of the linear regression has turned sideways, indicating a potential trend change to the upside. In fact, the upward trend for 2025 could have resumed 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 likely already complete.

Nearest Support Levels:

S1 – 1.1658

S2 – 1.1597

S3 – 1.1536

Nearest Resistance Levels:

R1 – 1.1719

R2 – 1.1780

R3 – 1.1841

Trading Recommendations:

The EUR/USD pair maintains an upward trend amid the weakening influence of geopolitics on market sentiment and diminishing geopolitical tensions. The global fundamental backdrop for the dollar remains extremely negative, so we continue to expect long-term growth in the pair.

If the price is positioned below the moving average, short positions can be considered with targets at 1.1658 and 1.1597 on technical grounds. Above the moving average line, long positions are relevant with targets at 1.1841 and 1.1902. The market continues to distance itself from geopolitical factors, and the dollar continues to lose its only support for growth.

Explanations for the Illustrations:

• Linear Regression Channels help identify the current trend. If both are pointing in the same direction, it indicates a strong trend.
• The Moving Average Line (settings 20,0, smoothed) indicates the short-term trend and the direction in which trading should currently proceed.
• Murray Levels serve as target levels for movements and corrections.
• Volatility Levels (red lines) indicate the likely price channel in which the pair will trade over the coming days, based on current volatility metrics.
• CCI Indicator: Its entry into the oversold area (below -250) or the overbought area (above +250) signifies that a trend reversal in the opposite direction is approaching.