Overview of the EUR/USD Pair. October 27. The Dollar Will Rise Only in One Case

The EUR/USD pair traded sluggishly on Monday because it had no drivers. In fact, the euro has traded within a narrow range with minimal volatility for more than a week. That is unsurprising: few important events have occurred recently, and the macro backdrop ranks low on many traders' priority lists. Ahead of a series of major events, the market has already started guessing how EUR/USD will behave, and some experts' conclusions are truly surprising.

Start, of course, with the two nearest events — the European Central Bank and the Federal Reserve meetings. Briefly: the ECB has already delivered two policy tightenings and is expected to raise rates again before year-end and once more in spring 2027. The Fed has delivered one hike; a second is expected in December and, in the most hawkish scenario, a third could follow in March next year. So, across the tightening cycle, the ECB will likely raise rates more than the Fed in most scenarios. That settles the first point.

Markets often price events well in advance. Look at the past two months for EUR/USD: only the dollar has risen while the euro can't even mount a correction. Which of the two central-bank tightenings has the market probably already priced in? In our view — the Fed's. That implies the Fed will tighten less than the ECB, and the market has already worked through Fed tightening. What should we then expect for EUR/USD this week if neither the Fed nor the ECB raises rates?

One might say the euro should strengthen. In reality, the market ignores all euro-positive factors and has been buying only the greenback for two months. So even this week, regardless of fundamentals or macro data, the dollar can still appreciate. To rationalize another dollar rise, analysts often use a tired substitution of concepts: "the Fed will be more hawkish than before" while "the ECB will be the opposite." In other words, it doesn't matter that both central banks may make similar decisions and that monetary prospects may actually be more hawkish for the ECB—what matters is justifying a new dollar rally by any means.

Why else might the dollar keep rising? There is essentially one reason: speculation. Simply put, the market may keep buying the dollar without any grounding in fundamentals, macro data, or central-bank actions—because the dollar is rising, and rising assets attract buyers. We understand many traders will dislike this explanation, but not all FX moves are logical or grounded. Anyone who has spent time watching price action will find that obvious.

The average volatility of EUR/USD over the last 5 trading days, as of October 27, is 50 pips, which we classify as "average." We expect the pair to move between 1.1133 and 1.1233 on Tuesday. The higher linear-regression channel has turned down, indicating another trend change. The CCI entered the oversold area five times and formed four bullish divergences, warning that the illogical downtrend may be ending. However, the market has so far reacted weakly 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 decline as a correction before a new uptrend. The global fundamental backdrop for the dollar remains negative, but in 2026, geopolitics, followed by the Fed's hawkish stance, provided strong support for the US currency. When the price is below the moving average, consider short positions with targets at 1.1133 and 1.1108. Above the moving average, long positions are relevant, with targets at 1.1292 and 1.1353.