The EUR/USD currency pair resumed its decline on Tuesday, once again driven by geopolitical factors. Recall that on Monday, news leaked that the White House was willing to make some concessions to Iran and even temporarily lift all sanctions regarding Iranian oil. Shortly afterward, Donald Trump announced that new attacks on Iran were postponed for some time, as leaders from Qatar, Saudi Arabia, and the UAE urged him not to resume the war against Iran. According to Donald Trump, these countries believe that an agreement with Iran may be possible in the near future, and thus, the resumption of hostilities would only hinder diplomacy.
However, by Tuesday, the American president once again hinted at possible strikes if a deal is not signed. Thus, every day, Trump manages to share both optimistic news and new threats. The market is forced to react, if not to every message, then to every second one, as they alternate. We continue to observe "swings" in the market.
Traders can only speculate about the progress of the negotiations. No official information has been released to the public. Information must be gleaned from various insiders, most of whom could be banal "leaks." For instance, Trump has given several private and exclusive interviews to Axios. However, what distinguishes the information presented through Axios from that coming directly from the U.S. president? In fact, nothing. In the first case, it is "insider information"; in the second, it is official. But what difference does it make to traders if neither is confirmed by any evidence?
In our view, Trump continues to exert psychological pressure on Iran through constant changes in rhetoric. Tehran is no longer reacting to the latest threats coming from the White House. If we summarize all the incoming information and add the fact that a ceasefire is still in place, it is probable that negotiations are indeed taking place. However, how close the parties are to reaching an agreement remains unclear.
Furthermore, the information coming from Iran and the U.S. indicates that there is still a long way to go before a deal is struck. The demands of Tehran and Washington differ significantly. Therefore, it is not clear what kind of agreement could be on the table in the coming days. Likely, the market also does not understand this, as it maintains a relatively high demand for the American currency. Even if war does not resume, a prolonged, stagnant conflict will still provoke another surge in energy prices. Strategic oil reserves worldwide, including in the U.S., are decreasing, while the U.S. aims to profit significantly from the Strait of Hormuz blockade. However, they seem to have forgotten that increasing exports requires higher oil production volumes.
The average volatility of the EUR/USD currency pair over the last five trading days, as of May 20, is 57 pips and is characterized as "average." We expect the pair to move between levels 1.1540 and 1.1654 on Wednesday. The upper channel of the linear regression has turned upward, indicating a change in trend to bullish. In fact, the upward trend of 2025 could have resumed a month ago. The CCI indicator has entered the overbought area and formed two "bearish" divergences, signaling the start of a downward correction that is still ongoing.
Nearest Support Levels:S1 – 1.1597S2 – 1.1536S3 – 1.1475Nearest Resistance Levels:R1 – 1.1658R2 – 1.1719R3 – 1.1780Trading Recommendations:The EUR/USD pair continues its downward movement, which is presumed to be a correction within a larger global upward trend. The global fundamental background for the dollar remains extremely negative, and only geopolitical factors regularly provide support. With the price positioned below the moving average, short positions can be considered with targets at 1.1540 and 1.1536. Above the moving average line, long positions are relevant with targets at 1.1780 and 1.1841. The market continues to move away from geopolitical factors, but the last week has been disappointing for the euro. We do not expect a stronger decline at this time, but no one knows how relations between Iran and the U.S. will evolve from here.
Explanations for the Illustrations:Linear Regression Channels: Help define the current trend. If both are directed in the same direction, it indicates a strong trend.Moving Average Line (settings 20,0, smoothed): Determines the short-term trend and direction in which trading should be conducted.Murray Levels: Target levels for movements and corrections.Volatility Levels (red lines): Likely price channel where the pair will trade in the coming days based on current volatility metrics.CCI Indicator: Its entrance into the oversold zone (below -250) or the overbought zone (above +250) indicates that a trend reversal is approaching in the opposite direction.