The EUR/USD currency pair traded relatively calmly on Thursday, but had managed to consolidate below the moving average line the day before. In fact, everyone is now used to the constant back-and-forth around the moving average. Over the past month and a half, the pair's movement has been such that a 100-pip rise is followed by an 80-pip fall. In other words, the European currency rises steadily, but very weakly, with frequent corrections and pullbacks. Unfortunately, with such price action, moving averages are almost useless. Moreover, this kind of price movement displays signs of both a trend and a flat, which is important to understand. It's not exactly sideways movement, but corrections account for up to 90% of trend movements.
However, all questions disappear when you switch to the daily time frame. Whatever the movement looks like on the 4-hour chart, on the daily timeframe, it is clear that the European currency has been rising almost non-stop for the ninth consecutive month. Yes, the current upward movement is not as strong as it was during the first six months of the year, but it remains an uptrend, with minimal corrections on the daily chart. On a global scale, the euro remains near its 3-year highs.
This week, the market has already faced disappointment a couple of times. One example was Jerome Powell's speech. Honestly, we still don't understand who and why, except for the Fed, to make the most "dovish" moves, when Fed officials have been repeating this mantra for a year and a half now that rates will only change based on macroeconomic data. No one in the FOMC was eager to cut rates at the start of the year or in 2024. No one in the Committee was in a hurry to ease monetary policy.
In recent days, Powell's speech has been dissected in the media from all sides, and the general consensus seems to be: the dollar is rising because the market's "dovish" expectations have not been met. However, we believe this conclusion is wrong. First, the US dollar is hardly rising at all—at least not against the euro. Perhaps the British pound is indeed losing ground, but the euro is only 150–200 pips away from its highest point in the last three years.
Second, neither Jerome Powell's rhetoric, nor the FOMC Committee's stance, nor Donald Trump's actions regarding the Fed have changed in any meaningful way lately. In other words, absolutely nothing has changed. If nothing has changed, why would anyone expect the dollar to rise?
Let's also recall that in the first half of 2025, the dollar collapsed even when the ECB was cutting rates and the Fed was holding steady. Now, the ECB is on hold and the Fed is cutting. Thus, in our view, the dollar still has only one direction—down. Keep in mind the nature of the current movement, which is characterized by numerous corrections, pullbacks, and other unfavorable features for traders.
The average volatility of the EUR/USD pair over the last five trading days, as of September 26, is 74 pips and is characterized as "average." We expect the pair to move between 1.1600 and 1.1748 on Friday. The longer-term linear regression channel is pointing up, which still indicates an uptrend. The CCI indicator moved into the overbought zone last week, which could have triggered the new round of downward correction.
Nearest Support Levels:
S1 – 1.1597
S2 – 1.1475
S3 – 1.1353
Nearest Resistance Levels:
R1 – 1.1719
R2 – 1.1841
R3 – 1.1963
Trading Recommendations:
The EUR/USD pair has initiated a new correction, but the uptrend remains visible on all timeframes. The dollar is still under very strong influence from Trump's policies, with no plans to "stop here." The dollar rose as much as it could (a whole month), but now it looks like it's time for another long leg down. With the price below the moving average, small shorts can be considered with targets of 1.1600 and 1.1597 based purely on technical factors. If above the moving average, long positions remain relevant with targets at 1.1841 and 1.1963 in line with the prevailing trend.
Chart Elements Explained:
- Linear regression channels help determine the current trend. If both channels point in the same direction, the trend is strong.
- The moving average line (settings 20,0, smoothed) indicates the short-term trend and trade direction.
- Murray levels serve as target levels for moves and corrections.
- Volatility levels (red lines) are the likely price channel for the next day, based on current volatility readings.
- The CCI indicator: dips below -250 (oversold) or rises above +250 (overbought) mean a trend reversal may be near.
