EUR/USD Overview. August 6. What Is the Point of the Strait of Hormuz Deal?

The EUR/USD currency pair continued to trade fairly calmly, albeit with an upward bias. It was clear that the market liked the news about a possible opening of the Strait of Hormuz, and nobody is thinking right now about the "bucket of cold water" that could be dumped on it at any moment. However, we would immediately like to say that, in our view, the euro is rising not because of geopolitics. Two months ago we said that the Federal Reserve was extremely unlikely to raise the key rate in 2026. Kevin Warsh's desire to fight high inflation does not correspond to the fundamentals that brought him to the Fed chair in the first place. Recall that a key requirement for candidates to the position vacated by Jerome Powell was a readiness to pursue monetary easing—something Trump could not get from Powell. Thus, in words, Warsh may support fighting high inflation by all means, but it is not certain that this will lead to a tightening of monetary policy.

If the Strait of Hormuz is opened (which is still very doubtful), inflation will continue to slow on its own. In that case, the Fed will not need to raise the key rate at all. If the labor market continues to cool, the Fed will not risk raising the key rate. If the U.S. economy continues to slow, the Fed will have yet another reason not to tighten. From a technical point of view, on all timeframes the euro's prospects look better than the dollar's. The weekly timeframe still shows the 2022 uptrend. The daily timeframe shows a sideways channel, and price is moving from the lower boundary (after the deviation) to the upper. The 4-hour timeframe shows an upward trend. In addition, note that the market has for several months ignored the positive fundamentals for the euro, in particular European Central Bank tightening. Thus, we currently see no reason why the dollar could show a significant rise. In our view, the euro is oversold and undervalued.

But will the Strait of Hormuz actually be opened? Oman, Iran and the U.S. can agree on anything, but all previous deals ended—everyone knows how and with what. After reaching an agreement on Hormuz, Donald Trump will return to the issue that started it all—the Iranian nuclear program. Reaching a consensus on that issue is almost impossible, so at any convenient moment American missiles will fly at Iran again, and Tehran can close Hormuz once more, since Hormuz is its key lever of pressure on the White House. Therefore, in our view, any deal between Iran and the U.S. is not worth much until the "nuclear question" is resolved. As for the pair's further prospects, regardless of geopolitics, we expect only euro appreciation. We expected it earlier in the first half of the year, but then Donald Trump's actions in the Middle East triggered capital flight into the dollar.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of August 6 is 63 pips and is characterized as "average." We expect the pair to move between 1.1484 and 1.1610 on Thursday. The upper linear regression channel is directed downward, indicating a continuation of the downward trend. The CCI indicator entered the overbought area, warning of a possible downward correction.

S1 – 1.1536

S2 – 1.1505

S3 – 1.1475

R1 – 1.1566

R2 – 1.1597

R3 – 1.1627

The EUR/USD pair has begun a new upward tendency on the 4-hour timeframe, which may be the very start of a new leg of a global uptrend on higher timeframes. The global fundamental backdrop for the dollar remains negative, but in 2026 geopolitics first, and then the Fed's "hawkish" stance provided strong support for the dollar. However, every fairy tale comes to an end sooner or later. With the price positioned below the moving average, short positions can be considered, targeting 1.1444 and 1.1414. Above the moving average line, long positions are relevant with targets of 1.1597 and 1.1610.