Overview of the EUR/USD Pair. October 8. The Music Didn't Play for Long

The EUR/USD currency pair on Wednesday predictably resumed its downward movement after a microscopic correction. Yesterday we said the dollar's fall looked like a miracle in the current circumstances. The euro's fall does not look miraculous — the single currency has been falling for a whole month. Meanwhile, the market keeps finding all sorts of reasons to buy the dollar. Consider this: what concrete grounds did the market have to buy the US currency on Wednesday if no important events occurred during the day?

Only late in the evening were the minutes of the latest Federal Reserve meeting published — a document long treated as a mere formality. The point is that Fed minutes usually contain information the market already knows. Moreover, minutes are published with a three-week lag, so by the time they appear they have already lost much of their immediacy. Recall that at the start of the month several important US reports were released that affect Fed policy: labor-market prints and the PCE index, which many FOMC members regard as the most accurate and relevant inflation gauge. In other words, since the last meeting at least three important releases could have altered the committee's stance.

And they did. Recent remarks by Fed officials show that hawkish sentiment remains, but no one intends to hurry with tightening or "race" rate increases. Thus an October hike now looks unlikely, and December may bring only a second tightening. By contrast, the European Central Bank could have raised rates for the fourth time in 2026. That is an objective reality: eurozone inflation accelerated to 3.8% — up from 1.7% a year ago. The ECB has already tightened twice and faces no external constraint, so it can raise rates further. At the remaining three meetings this year, the ECB could plausibly tighten policy twice more — four hikes in total — and yet the euro keeps falling like a stone.

On Wednesday the market again found something to latch onto to buy more dollars. This time the trigger was France. Strikes and protests in Paris and other cities continue, and Finance Minister Roland Lescure said the government may bypass parliament to pass the 2027 budget, which includes spending cuts and tax increases. That detail didn't interest the market on Tuesday but did on Monday and Wednesday. Meanwhile, US fiscal problems, repeated shutdown threats, rising sovereign debt and surging yields do not seem to interest traders. The movement remains purely inertial and speculative. At this rate, the euro could even fall toward parity with the dollar.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of October 8 is 92 pips and is characterized as "high." We expect the pair to move between 1.1101 and 1.1285 on Thursday. The higher linear-regression channel has turned sideways, indicating another trend change. The CCI indicator entered the oversold area three times and formed three "bullish" divergences, which warn of the end of the illogical downtrend. However, the market is not responding to technical signals.

S1 – 1.1169

S2 – 1.1108

R1 – 1.1230

R2 – 1.1292

R3 – 1.1353

The EUR/USD pair continues to move downward, but we still view the pair's decline as a correction before a new uptrend. The global fundamental backdrop for the dollar remains negative, but in 2026, geopolitical events first, and then the Fed's "hawkish" stance, provided strong support to the US currency. When the price is below the moving average, consider short positions with targets of 1.1108 and 1.1101. Above the moving average line, long positions are relevant, with targets of 1.1353 and 1.1414.