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05.11.2025 03:46 AM
The EUR/USD currency pair traded with minimal volatility and in a downward direction on Tuesday. This time, all blame can be placed on Christine Lagarde. Her morning speech was the only event of the day. It doesn't matter that Lagarde didn't address monetary policy at all, focusing instead on Bulgaria's transition to the euro and the potential for the European Central Bank to regulate the cryptocurrency market. Analysts, traders, and experts do not care about this now. What matters is having a reason to sell euros and buy dollars. Why? That too is irrelevant.
Thus, the euro continues to slide, with no fundamental or macroeconomic grounds. The CCI indicator has "grown tired" of entering oversold territory and creating "bullish" divergences; the euro falls even on days with no news whatsoever, while experts keep inventing reasons to explain the strengthening of the U.S. dollar.
One of the most common explanations now is the weakness of the European economy and the Fed's insufficiently "dovish" stance. From our perspective, these two reasons sound absurd. However, there are as many opinions in the market as there are people. We are not saying that other market participants are wrong in their conclusions, but we do not consider these reasons to be "causes." We still believe that the current downward movement lacks a real fundamental or macroeconomic basis, making it illogical.
The European economy has experienced weak growth year after year over the past 10-15 years. This is clearly not the reason for the current devaluation of the euro when the list of factors for the dollar's decline would not fit on an A4 sheet. The main issue is not that the dollar is rising without justification; the main problem is that it is rising even though there are many reasons for its decline. Regarding the "insufficiently dovish" stance of the Fed, that phrase even sounds a bit laughable. Recall that in the fall, the ECB completed its monetary policy easing cycle; the Bank of England recently paused for an indefinite period due to high inflation; and the Fed has already cut the key rate twice. And this is only the beginning.
Even if a decision is made in December not to lower rates for the third consecutive time, what will it change? Will Donald Trump stop demanding a loosening of monetary policy? Will he cease trying to dismiss all the "hawks" from the FOMC? Will Jerome Powell not resign in May of next year? We believe that the Fed now has only one way to go – down. The only question is how quickly the key rate will fall. Even the answer to this question is not particularly significant, because the ECB and the BOE will continue to maintain their current monetary policy parameters.
Thus, we continue to view the current strengthening of the U.S. dollar as entirely illogical. Moreover, in most cases, we observe daily volatility around 40-50 pips.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of November 5 is 66 pips, which is considered "average." We expect the pair to trade between 1.1427 and 1.1559 on Wednesday. The upper linear regression channel is moving sideways, indicating a flat. The CCI indicator entered oversold territory twice in October (!!!), which may signal a new wave of upward momentum.
S1 – 1.1475
S2 – 1.1414
S3 – 1.1353
R1 – 1.1536
R2 – 1.1597
R3 – 1.1658
The EUR/USD pair is attempting to start a new upward trend on the 4-hour timeframe, while the upward trend on all higher timeframes is still intact; however, the daily timeframe has been flat for several months. The global fundamental background continues to exert a strong influence on the U.S. dollar. Recently, the dollar has been rising, but local reasons are at least ambiguous. However, the flat on the daily timeframe explains everything.
When the price is below the moving average, small short positions can be considered with targets at 1.1475 and 1.1427 purely on technical grounds. Above the moving average line, long positions remain relevant with targets at 1.1841 and 1.1902, continuing the trend.
