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The EUR/USD currency pair exhibited no interesting movements on Friday. In fact, throughout the previous week and the entirety of February, volatility was very low, preventing traders from opening trades on timeframes longer than 5 minutes. What will the new week bring us?
The new week may start with a new "storm" in the currency market. On Saturday, Donald Trump ordered a military operation in Iran, which involved large-scale missile attacks on government, military, and nuclear facilities across the country. During the first day of the operation, the supreme leader of Iran, Ali Khamenei, was killed. Several high-ranking officials, including military leaders, were also eliminated. Essentially, the operation in Iran could conclude quite quickly, though not all experts believe this.
It is important to note that Trump aims to achieve a change of power in Iran. If Ali Khamenei is killed, but a leader who also refuses to pursue nuclear disarmament takes his place, then the military operation "Epic Fury" would be pointless. What difference does it make who will continue to develop the nuclear industry and create missiles capable of striking Europe or the US? Thus, Trump's objective is to carry out a coup, allowing opposition forces and revolutionaries to come to power; ideally, it would be someone from his own camp.
Regardless, the conflict may drag on for a long time or may conclude in just a few days, as Trump mentioned on Saturday evening. Therefore, traders can only await Monday and the subsequent decisions from the US president. From our perspective, the dollar has appreciated in recent weeks, not least due to the escalating situation surrounding Iran. Now that military actions have begun, market reactions may be "emotional" and volatile—likely in the short term.
On the one hand, the market has factored in the prospect of war in Iran for several weeks, so there is no reason for further dollar purchases. On the other hand, there is a difference between anticipating war and witnessing it unfold and seeing its scale. Until the last moment, no one understood how extensive the strikes on Iran would be. Additionally, what kind of retaliatory actions Tehran might take remains uncertain. It's also worth noting that, despite the dollar's recent strengthening, the US currency has again failed to show strong growth. Even on the 4-hour timeframe, all movement since January 28 is clearly a correction, which is much weaker and slower than the preceding growth.
Thus, we maintain our view that the upward trend will continue, regardless of the fundamental and macroeconomic backdrop, which often provides little real support for the dollar. This week in the Eurozone, several important indicators will be published, including inflation and the final fourth-quarter GDP estimate. However, it is unclear whether the market will even notice this data, as recent volatility suggests a very weak desire among traders to trade.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of March 2 is 46 pips, which is considered "average." We expect the pair to trade between 1.1771 and 1.1863 on Monday. The upper channel of the linear regression is directed upwards, indicating further growth of the euro. The CCI indicator has entered oversold territory, suggesting a resumption of the upward trend.
The EUR/USD pair continues to correct within an upward trend. The global fundamental backdrop remains extremely negative for the dollar. The pair spent seven months in a sideways channel; it is likely that now is the time to resume the global trend of 2025. The dollar has no fundamental basis for long-term growth. Therefore, all the dollar can expect is a flat or corrective movement. When the price is below the moving average, small short positions can be considered with a target of 1.1719 based purely on technical grounds. Above the moving average line, long positions remain relevant with targets of 1.1963 and 1.2085.
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