The EUR/USD currency pair continued the trend observed on Wednesday. Recall that on Monday and Tuesday, panic reigned in all financial markets, with the currency market moving in the direction of the appreciating dollar. This is not surprising, although we believe that the dollar rose again where it perhaps should not have. Throughout 2025, the American currency not only plunged amid Donald Trump's applause. Analysts and experts unanimously declared that the dollar was losing its status as a safe haven and "quiet port." Even central banks began to reduce their dollar reserves, although the process of de-dollarization of the global economy has been ongoing for several years.
However, the year 2026 arrived, and Donald Trump first started "stretching" his muscles on Venezuela and then launched a war against Iran. We believe this is indeed a war, not only between the US and Iran. Around 15 countries are already involved in this Middle Eastern turmoil. Meanwhile, EU countries are signaling that they are also ready to participate for future security. So, the narrative goes: we will fight to ensure safety. Thus, all of Trump's promises to complete the military operation within four weeks can be forgotten. Trump has stirred up a hornet's nest, and now the whole world will reap the consequences.
In parallel with the war in Iran, Trump may increase global tariffs to 15% this week, as reported yesterday by Treasury Secretary Scott Bessent. If this happens, all tariffs on European exports to the US will rise from 10% to 15%. It does not matter what was agreed upon last year between Washington and Brussels. The European Union has responded to this disheartening step by Washington with a decisive protest. However, all we can expect from Europe are protests and angry outbursts. In fact, Europe has long shown that if Trump says they should pay 15%, they will pay 15%. Europeans can conduct surveys indicating that the level of hatred for the American president is off the charts, but this does not change anything. The most Europe can do is to refuse to buy American goods. Yet, this refusal is not at the level of states or the entire alliance but rather at the level of individual consumers, who definitely cannot be forced to buy goods they do not need.
At the same time, Trump has achieved nothing with his tariffs. The US trade balance remains in deficit, the budget deficit remains, and national debt continues to grow. The military actions in Iran will cost Washington hundreds of unplanned billions of dollars. Interestingly, Americans recently recalled a speech by Kamala Harris, in which she stated that Trump would start a war within six months of taking office. Overall, the Democratic presidential candidate was only slightly off the mark. The dollar has paused its rise, but its future dynamics will entirely depend on developments in the Middle East. If we disregard geopolitics, there are still no grounds for the dollar to grow.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of March 6 is 102 pips, characterized as "high." We expect the pair to trade between 1.1475 and 1.1679 on Friday. The upper channel of the linear regression is directed upward, indicating the continuation of the upward trend. The CCI indicator has once again entered oversold territory, signaling a potential resumption of the upward trend.
Nearest Support Levels:
- S1 – 1.1597
- S2 – 1.1475
Nearest Resistance Levels:
- R1 – 1.1719
- R2 – 1.1841
- R3 – 1.1963
Trading Recommendations:
The EUR/USD pair continues its correction within the upward trend. The global fundamental backdrop remains of immense importance to the market and remains highly negative for the dollar. The pair has spent seven months in a sideways channel, and it is likely we are now at a point to resume the global trend of 2025. The dollar currently lacks a fundamental basis for long-term growth. We are currently observing another global correction. If the price is below the moving average, traders can consider small short positions targeting 1.1475 based on technical grounds and the complex geopolitical situation. Above the moving average, long positions remain relevant with targets at 1.1963 and 1.2085.
Explanations for Illustrations:
- Linear Regression Channels help determine the current trend. If both are oriented in the same direction, then the trend is strong.
- The moving average line (settings 20,0, smoothed) defines the short-term trend and the direction in which trading should currently proceed.
- Murray Levels are target levels for movements and corrections.
- Volatility Levels (red lines) indicate the probable price channel in which the pair will move over the next day, based on current volatility metrics.
- The CCI Indicator entering the oversold area (below -250) or the overbought area (above +250) indicates an impending reversal of the trend in the opposite direction.
