The EUR/USD currency pair soared upward by at least 130 points on Wednesday, reacting to the ceasefire between the U.S. and Iran. We will discuss the ceasefire in more detail, as there is indeed a lot to say on this matter. But let's start with the facts. Last night, Donald Trump announced that an agreement had been reached between Tehran and Washington for a two-week ceasefire. Interestingly, the basis for the ceasefire was not the 15-point list of ultimatums from Trump, but rather a 10-point list of demands from Iran. The U.S. president called it fair and stated that the next two weeks would be spent reaching a full ceasefire. Iran, for its part, committed to opening the Strait of Hormuz for two weeks, which immediately led to a drop in oil prices from $106 to $90.
In the currency market, only the U.S. dollar depreciated. Overall, exactly what we expected happened. As soon as Iran and the U.S. began official negotiations and the markets "sensed" a ceasefire, the dollar lost all support. The dollar is no longer of interest as a safe currency and "safe haven." For several weeks, it may continue to fall simply because it has lost its only support factor—geopolitics. The market may then remember the vast amounts of macroeconomic data from the U.S. that have been actively ignored over the past two months. It may recall the impending divergence in monetary policy among the ECB, the Bank of England, and the Fed. It may also be remembered that Donald Trump's policies, which led to a significant depreciation of the dollar last year, have not changed at all. All these factors could return the EUR/USD pair to an upward trajectory.
Naturally, such a scenario will only be possible if the conflicting parties genuinely make every effort over the next two weeks to resolve the conflict. Otherwise, everything will likely revert quite quickly to the situation of 2026. However, at this time, one cannot help but wish for the end of the conflict. Interestingly, the euro's exchange rate quickly recovered to the 1.1700-1.1750 range, suggesting it has only about 400 points to reach this year's highs. What are 400 points when there are still three-quarters of a year left? Recall that, like many other analysts, we believe that 2026 will be the year of a new decline for the American currency.
Of course, we cannot know when Trump will begin the next war or what policies the American president will adhere to until the elections in November. But if he wants to retain at least one chamber of Congress, he will need to quickly improve relations with the American electorate. Currently, the American electorate is set against Trump, just as they were six years ago. Americans are ready to vote for anyone but Trump; under the current circumstances, that means any Democrat. Interestingly, on the daily time frame, despite the significant drop in February and March, the EUR/USD pair has not fallen below the 23.6% Fibonacci level... just as it did before...
The average volatility of the EUR/USD currency pair over the last five trading days as of April 9 is 83 pips, characterized as "average." We expect the pair to trade between 1.1606 and 1.1772 on Thursday. The upper channel of the linear regression has turned downward, indicating a potential trend change. The CCI indicator has entered overbought territory, signaling a potential downward correction in the near future.
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 continues to maintain a downward trend driven by geopolitics. The global fundamental backdrop for the dollar remains extremely negative; however, the market has focused solely on geopolitics for more than a month, rendering all other factors largely irrelevant. When the price is below the moving average, short positions can be considered with targets of 1.1475 and 1.1353. If the price is above the moving average line, long positions can be kept with targets of 1.1627 and 1.1719. For a stronger upward movement, the geopolitical backdrop needs to start improving.
Explanations For Illustrations:
- Linear regression channels help identify the current trend. If both are directed in the same direction, the trend is strong.
- The moving average line (settings 20.0, smoothed) determines 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 probable price channel in which the pair will remain over the next day based on current volatility indicators.
- CCI Indicator: Its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.
