12.10.202604:50 Forex Analysis & Reviews: EUR/USD. October 12. The Euro Could Not Show Anything

The EUR/USD currency pair remained in place throughout Friday, as it has for the past several days. The downward impulse faded, but is it final? Recall that when traders begin to abandon a given direction, profit-taking on previously opened positions begins. That event triggers an initial move in the opposite direction. From the pair's current movements, we cannot say profit-taking on short positions has begun. If it had, shorts would be closing, and the euro would have market reasons to rise.

The US dollar has risen for five consecutive weeks. Moreover, this rise is almost uninterrupted and rather dubious from a fundamentals, geopolitics, and macroeconomics perspective. We have said many times that apart from tightening Fed monetary views there is no other growth factor for the US currency. Yet the market has been buying the dollar for five weeks straight. On what basis? Based on the prospect of two Fed rate hikes by the end of the year, while at the same time the European Central Bank has already carried out two policy tightenings? Are yields on European and British bonds rising? US bond yields are also rising. Geopolitical tension? What has changed in the Middle East or in eastern Ukraine over the past few weeks? In our view, there were no weighty reasons for such a strong dollar appreciation.

Thus, we continue to conclude that the current move is illogical and speculative. On the daily timeframe, the pair continues to correct within the uptrend that began in 2022.

Last week, no important fundamental events or macroeconomic releases occurred in either the US or the Eurozone. In the US, the ISM services activity index was released, matching traders' forecasts and prompting no reaction. The Federal Reserve minutes, although carrying a "hawkish" tint, are a formal event and were irrelevant at the time of release. More than three weeks have passed since the last Fed meeting. During that time, the US released Nonfarm Payrolls, the unemployment rate, and the PCE index—the three indicators that have the greatest influence on the Fed's monetary policy prospects. Therefore, one can be confident that many Monetary Committee members' sentiment has changed at least a little. If so, what significance do the Fed minutes have now if they provide no new information?

In the coming week, we can highlight US inflation as an important event. Forecasts suggest the Consumer Price Index will accelerate to 3.6%, which could increase the likelihood of Fed monetary tightening by year-end. However, what will a renewed acceleration of inflation actually change if the Fed is already set on another tightening and the labor market is cooling again? We believe this report will change absolutely nothing. But the market may price in a more "hawkish" Fed stance through year-end, which could support further dollar strength. In the past five weeks, the dollar has needed very little to keep rising.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of October 12 is 77 pips and is characterized as "average". We expect the pair to move between the levels 1.1126 and 1.1280 on Monday. The higher linear regression channel has turned down, indicating another trend change. The CCI indicator entered the oversold area three times and formed three "bullish" divergences, warning that the illogical downward trend may be ending. However, the market is not reacting to technical signals.

Nearest support levels:

S1 – 1.1169

S2 – 1.1108

Nearest resistance levels:

R1 – 1.1230

R2 – 1.1292

R3 – 1.1353

Trading recommendations:

EUR/USD 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. With price below the moving average, short positions are possible, targeting 1.1169 and 1.1126. Above the moving average, long positions are relevant, with targets at 1.1353 and 1.1414.

Explanations for the illustrations:

• Linear regression channels help determine the current trend. If both are directed the same way, the trend is currently strong.
• The moving average line (settings 20,0, smoothed) defines the short-term tendency and the direction in which trading should be conducted now.
• Murray levels are target levels for moves and corrections.
• Volatility levels (red lines) show the likely price channel the pair will trade in over the next 24 hours, based on current volatility indicators.
• The CCI indicator — entering the oversold area (below -250) or the overbought area (above +250) — signals an imminent trend reversal in the opposite direction.