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The EUR/USD currency pair unexpectedly soared on Friday. However, it cannot be said that volatility was off the charts that day; rather, it was only 60 pips, which is quite ordinary. Nonetheless, in comparison with the previous four days, 60 pips is considerable. The most important point is that the reasons behind the sharp rise of the euro are not entirely clear. Here are some very important points to remember.
Firstly, we fully support the euro's growth and believe that any increase is entirely justified. A multitude of factors support this. The technical analysis supports the upward movement on the 4-hour, daily, and weekly timeframes. On the 4-hour TF, we have a local upward trend. On the daily TF, there is a yearly flat, within which price moves from the lower boundary of the sideways channel to the upper boundary, with preliminary deviations. On the weekly TF, we have an upward trend that began back in 2022.
Secondly, globally, the US dollar received support in 2026 primarily due to geopolitics. When Donald Trump began the war with Iran, capital started fleeing from the Middle East, using the dollar as a "safe haven" and as an intermediate means for transferring capital from one instrument and asset to another. However, geopolitics has an expiration date. In other words, capital cannot flee indefinitely. Sooner or later, it will escape. And that is what happened a few months after the conflict began.
Thirdly, the fundamental backdrop does not support the US currency. Two months ago, the market somehow believed that tightening of the Federal Reserve's monetary policy was inevitable in 2026. The market based its conclusions exclusively on Kevin Warsh's rhetoric, forgetting entirely that Warsh was appointed by Donald Trump, who likely learned from mistakes made after Jerome Powell's tenure. Therefore, we have every reason to assert that Warsh is neither inclined nor intends to raise the key rate. Meanwhile, Trump has resumed pressure on the Fed, demanding a rate cut and renewing his desire to fire Lisa Cook.
Fourthly, macroeconomic reports in recent months have significantly disappointed in the US. The market continues to ignore European data, but it cannot ignore US data. Here we see a drop in US GDP to 1.5%, a two-month slowdown in consumer prices, and a four-month decline in the labor market, particularly reflected in the NonFarm Payrolls report. Thus, almost all factors suggest that the dollar will continue to depreciate.
Regarding Friday, after two weeks of "stagnation," the European currency began to rise early in the morning, although there were no local reasons for this. In other words, we are not surprised by the euro's appreciation against the dollar—it's just that the move was unexpected on Friday. In the afternoon, US reports of medium significance on retail sales and consumer sentiment were released. Both reported weaker-than-anticipated values, which supported the decline in the US dollar.
The average volatility of the EUR/USD currency pair over the past 5 trading days as of August 17 is 37 pips and is characterized as "low." We expect the pair to move between 1.1534 and 1.1608 on Monday. The overall linear regression channel is directed downwards, indicating a continuation of the downward trend. The CCI indicator has entered the overbought area and formed a "bearish" divergence, warning of a possible downward retracement. However, we have already seen several pullbacks.
S1 – 1.1566
S2 – 1.1536
S3 – 1.1505
R1 – 1.1597
R2 – 1.1627
R3 – 1.1658
The EUR/USD pair continues to show an upward trend on the 4-hour TF, which may mark the beginning of a new phase of a global uptrend on higher timeframes. 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. However, at present, these factors no longer support the dollar. When the price is below the moving average, short positions can be considered with targets at 1.1505 and 1.1475. Above the moving average line, long positions are relevant with targets at 1.1597 and 1.1608.
Linear regression channels help determine the current trend. If both are directed in one direction, the trend is currently strong;
The moving average line (settings 20,0, smoothed) indicates 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 spend the next day, based on current volatility readings;
The CCI indicator — its entry into the oversold area (below -250) or into the overbought area (above +250) indicates that a trend reversal to the opposite direction is approaching.
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