03.08.202604:17 Forex Analysis & Reviews: Overview of the EUR/USD Pair. August 3. The Dollar Has Exhausted Its Luck

The EUR/USD currency pair rose by 170 pips over the past week, something that hasn't happened for quite a while. However, we believe that the growth of the euro was entirely legitimate. Moreover, it should have occurred a month and a half ago, and the dollar still has no prospects. For the past few months, we have repeatedly said the same thing: if it weren't for the geopolitical conflict in the Middle East, the U.S. dollar would already be trading above $1.20 against the euro. The current year began with renewed growth in the European currency, and the EUR/USD pair surpassed the 1.20 mark. This movement was expected to continue, as the long-term trend remains upward (clearly visible on the weekly timeframe).

But then Donald Trump intervened by launching a war against Iran, which "backfired" on everyone, including himself. Trump achieved absolutely nothing with the war in the Middle East. Energy prices soared, inflation began to accelerate globally, and the Federal Reserve, preparing to resume its monetary easing cycle, was now forced to consider raising the key rate. Trump's political ratings fell even lower ahead of the congressional elections. So even personally, Trump did not benefit from the war with Iran. The only thing he accomplished was to distract public attention from the "Epstein case," in which he was one of the main figures. In general, judge for yourself what Trump achieved with his aggression in the Middle East.

Initially, the dollar was used by the market as a "safe haven," but then it became clear that there could be no talk of near-term Fed monetary easing. As the market primarily focused on the Fed's monetary policy, the dollar rose further because the American central bank was forced to consider tightening policy. Thus, instead of the inevitable decline of the American currency, we observed its growth for almost the entire first half of 2026. This growth is absolutely unnecessary for Trump himself.

However, as of July, the dollar has exhausted all growth factors, even local and random ones. Back in June, the market had already priced in future tightening of the Fed's monetary policy when Kevin Warsh stated that inflation in the U.S. needed to be fought against. The market somehow concluded that "fighting inflation" meant an inevitable rise in the key rate, even though U.S. inflation had exceeded the target level for five years, and, under Jerome Powell, for example, it was not possible to bring it down. Last year, the Fed even had to lower the key rate (again, thanks to Donald Trump's policies) because the labor market created only 200,000 jobs over the entire year. At the same time, the June tightening of the European Central Bank's monetary policy was ignored by the market; the fact that Trump appointed Warsh to cut the key rate was forgotten; and the fact that inflation can fluctuate due to constant changes in the geopolitical backdrop was completely overlooked. For example, as of today, Trump has once again pardoned Iran and abandoned a new series of strikes.

Thus, the dollar was rising in 2026 even before factors had yet to materialize, and the geopolitical factor cannot provoke the eternal growth of the American currency. It has its expiration date. Therefore, as before, we believe that the U.S. dollar will resume its long-term decline with targets above $1.20 against the euro. Even if there is no local support for the euro in the coming weeks, it can still quickly return to $1.20 and surpass that level. This is simply due to the cumulative effect of unprocessed and ignored market factors.

The average volatility of the EUR/USD currency pair over the past 5 trading days, as of August 3, is 81 pips and is considered "average." We expect the pair to move between levels 1.1447 and 1.1609 on Monday. The upper linear regression channel is directed downward, indicating the persistence of a bearish trend. The CCI indicator has entered the overbought area, which now warns of a possible downward correction.

Nearest Support Levels:

S1 – 1.1505

S2 – 1.1475

S3 – 1.1444

Nearest Resistance Levels:

R1 – 1.1536

R2 – 1.1566

R3 – 1.1597

Trading Recommendations:

The EUR/USD pair has started a new upward trend on the 4-hour timeframe, which may be the beginning of a new round of the global upward trend on higher timeframes. 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 American currency. However, every fairytale comes to an end sooner or later. When the price is below the moving average, short positions with targets of 1.1414 and 1.1383 can be considered. Above the moving average, long positions are relevant with targets of 1.1597 and 1.1609.

Explanations for Illustrations:

Linear regression channels help define the current trend. If both are directed in one direction, it means that the trend is strong at present;

The moving average line (settings 20,0, smoothed) determines the short-term trend and direction in which trading should currently be conducted;

Murray levels are target levels for movements and corrections;

Volatility levels (red lines) indicate the probable price channel in which the pair will operate for the next day based on current volatility parameters;

The CCI indicator's entry into the oversold area (below -250) or into the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.