29.07.202605:04 Forex Analysis & Reviews: EUR/USD Overview. July 29. The Market Awaits "Hawkish" Rhetoric from the Fed Again

The EUR/USD currency pair continued its sluggish decline on Tuesday and even dipped below the sideways channel it has been trading in for the past month. However, volatility remains weak, and neither the dollar nor the euro can show significant growth at this time. The outcome is likely to unfold in the latter half of the week, when both the Federal Reserve and the Bank of England will hold meetings and the Eurozone inflation report will be released. However, we might express it differently: the resolution MAY occur in the latter half of the week. Or it may not.

If the market is once again waiting for the Fed meeting to determine its further strategy, we have bad news for it. If traders want to continue buying the dollar, they do not need the Fed. The Fed has not given a single concrete signal about upcoming monetary policy tightening in over a month and a half, and it will not provide one today either. This is simply because Kevin Warsh is not the kind of person or chair to openly promise a rate hike. Perhaps there will be half-hints? Naturally, the leader of the US central bank will once again draw attention to high inflation. However, this does not mean that it will not decrease by the end of July or August. Let's reiterate: inflation depends solely on the status of the Strait of Hormuz, which is tied to the status of the standoff in the Middle East. Since the situation in the Middle East changes very frequently and dramatically, nothing specific can be predicted. The market is merely playing out the scenario it most wants to see.

We continue to believe that the entire last downturn of the pair has been illogical, and the current decline of the euro is as well. The market entirely overlooks the tightening of the European Central Bank's monetary policy, which is quite likely to continue this fall. The market ignores all positive reports from the EU and negative ones from the US. Not even geopolitical factors can currently explain the dollar's rise. On June 17, Iran and the US signed a memorandum of understanding and a ceasefire while also opening the Strait of Hormuz. And what happened? Did the dollar lose ground? No. For two weeks, Iran and the US were again at war, and at the present moment, hostilities have ceased. And still, the dollar continues to rise or, at least, not fall.

Thus, we consider all movements since June 17 to be illogical. It might be manipulation by major players who are already preparing for mass sell-offs of the dollar while trying to show other traders that the US currency will continue to appreciate. This is to encourage retail traders to open more short positions, which will provide liquidity for the long positions of market makers. After all, for someone to buy, someone must sell. Following a decline of 450 pips in May-June, the euro has not been able to recover properly. What could suddenly make the euro so weak if the ECB is tightening and the geopolitical conflict has at least moved out of the full-scale war phase? Iran and the US can sign a ceasefire fifty-eight times and violate it just as many times. Will the dollar continue to rise during all this time?

The average volatility of the EUR/USD currency pair over the last 5 trading days as of July 29 is 48 pips and is characterized as "low." We expect the pair to move between 1.1349 and 1.1445 on Wednesday. The upper channel of the linear regression is directed downward, indicating the persistence of a bearish trend. The CCI indicator has entered the oversold area and formed two bullish divergences, warning of a possible end to the downtrend.

Nearest Support Levels:

S1 – 1.1353

S2 – 1.1292

S3 – 1.1230

Nearest Resistance Levels:

R1 – 1.1414

R2 – 1.1475

R3 – 1.1536

Trading Recommendations:

The EUR/USD pair retains a downward trend, which is presumed to be a correction within the framework of the global upward trend, as can be clearly seen 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 US currency. When the price is below the moving average, short positions can be considered with targets at 1.1353 and 1.1292. Above the moving average line, long positions are relevant with targets at 1.1445 and 1.1475. The market has remained in a flat state for the fourth consecutive week.

Explanations for Illustrations:

• Linear regression channels help determine the current trend. If both are directed in the same way, 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 indicate target levels for movements and corrections;
• Volatility levels (red lines) indicate the probable price channel in which the pair will spend the next day, based on current volatility indicators;
• The CCI indicator — its entry into the oversold area (below -250) or overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.