The EUR/USD pair spent virtually all of Monday standing still. As expected, volatility was minimal, and no important information reached traders during the day. So it's not surprising there were no price moves on the week's first trading day. Low volatility at the moment is hardly surprising — we publish volatility charts every day, and they clearly show this pattern has persisted for roughly two months. Thus, on days when the macro and fundamental calendar is empty, expecting market moves is naive.
One important fact stands out now — the US dollar is very overbought. The currency has been rising for almost a month, and if you ask someone why the dollar has been strengthening for a whole month, they're unlikely to have a convincing answer. Initially, EUR/USD corrected after a fairly long and strong rally — that made sense. Then the market began to price in Federal Reserve tightening, although even in summer it was already pricing Fed moves on each of Kevin Warsh's speeches. Then the Fed raised rates and allowed for further tightening, and the market priced that in again. Each new dollar rise forces the same question: okay — but on what basis is the dollar supposed to continue rising?
Recall that 2026 has been a banner year for the US currency. If it weren't for Trump's war with Iran, the dollar would already be trading consistently above 1.2000 against the euro. If inflation didn't accelerate afterward, the Fed might not have considered tightening. If the market hadn't ignored ECB policy and other euro-supportive factors, the dollar's advance would also be much more modest. Even with this remarkable confluence of events, the dollar has not really produced a sustained long-term rally in 2026. The weekly chart shows this best: the most the dollar has managed this year is a sideways range.
In essence, the US currency has shown no long-term appreciation. Price is stuck inside a sideways channel and has traded there for a year — a normal pause in the long term. So if the dollar couldn't break out of its down-bias when conditions were favorable, what should we expect next for the US currency? Also note that on the 4-hour timeframe the pair entered oversold territory twice and formed two bullish divergences. So even the 4-hour chart points to the excesses of the dollar's rise. We have long argued that the current dollar strength is illogical. As before, over the long term we expect the resumption of the global uptrend that began in 2022.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of September 22 is 46 pips and is classified as "medium." We expect the pair to trade between 1.1421 and 1.1513 on Tuesday. The higher linear-regression channel points up, indicating an uptrend. The CCI entered the oversold area twice and formed two bullish divergences, warning of a possible end to the downward correction.
Nearest support levels:S1 – 1.1475
S2 – 1.1414
S3 – 1.1353
Nearest resistance levels:R1 – 1.1536
R2 – 1.1597
R3 – 1.1658
Trading recommendations:The EUR/USD pair continues to move downward, but we still view the decline as a correction ahead of a new long-term uptrend. 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 US currency. With price below the moving average, consider short positions with targets 1.1421 and 1.1414. Above the moving average line, long positions remain relevant with targets 1.1597 and 1.1658.
Explanations for Illustrations:Regression channels help determine the current trend. If both are directed in the same direction, it means the trend is currently strong;
The moving average line (settings 20,0, smoothed) defines the short-term trend and the direction in which trading should be conducted at present;
Murray levels are target levels for moves and corrections;
Volatility levels (red lines) are the probable price channel within which the pair will spend the next 24 hours based on current volatility indicators;
The 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.