The EUR/USD currency pair declined sharply on Monday. Thus, our most pessimistic forecasts came true. The market is once again treating the dollar as a safe haven, finding no alternatives among other currencies. The euro and the pound are both struggling, which naturally benefits the Eurozone and the UK. However, no one seems to care who benefits from a strong dollar.
In principle, there is little to say about the wars in the Middle East. What distinguishes one war from another? Nothing. Destruction of infrastructure, strikes on military bases, and civilian casualties. The US and Israel delivered the first strike on Iran on Saturday. Since then, Tehran has retaliated with missile strikes on more than a dozen countries where American military bases are located or which are considered allies of the US and Israel. Negotiations between Tehran and Washington have practically collapsed. Donald Trump will only call for a ceasefire if Tehran accepts Washington's conditions. But let's be honest: Tehran could have accepted Washington's terms many times over the past decades. The question is: how legitimate is Trump's latest ultimatum, presented as a "condition" or "business proposal"?
In essence, Trump demands capitulation and a change of political course and regime in Iran. In simpler terms, Trump wants to see compliant leaders in charge of Iran, ready to carry out orders from the White House. There is nothing new in Trump's policies, as we can see. He imposed various tariffs and sanctions on the world, and there's nothing left to impose on Iran. The country has been living under global sanctions for about 50 years. Thus, instead of a "trade bludgeon," military force has had to be employed.
The markets are reacting to the situation just as they would to any other escalation in the Middle East. Oil and gas prices have already soared, and markets are hedging against a prolonged war with Iran that may involve the entire Middle East to varying degrees. As for the currency market, as we mentioned, it's simple. The dollar is rising simply because it is a safe asset, a "safe haven."
In reality, throughout 2025, the dollar actively squandered its status as a "safe currency." However, when a new full-scale war began, the market quickly returned to the dollar, as no other alternatives were found. The American currency, which had the potential to drop below the 20 level against the euro during the first two months of this "cheerful" year, is now reliably rising, ignoring macroeconomic factors. How long this rise will continue is simply impossible to say. Everything will depend on how long the war in the Middle East lasts and how long the Strait of Hormuz remains blockaded. By the way, experts have stated that Iran cannot block the Strait of Hormuz for an extended period. Similarly, Trump cannot overthrow the current regime and force Tehran to abandon its nuclear weapons without a ground operation. Meanwhile, Iran has indicated that it is prepared to continue responding to attacks. Thus, there is no talk of capitulation, despite the elimination of many high-ranking officials.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of March 3 is 59 pips, which is considered "average." We expect the pair to trade between 1.1633 and 1.1751 on Tuesday. The upper channel of the linear regression points upward, indicating the continuation of the upward trend. The CCI indicator has once again entered oversold territory, signaling a possible resumption of the upward trend.
Nearest Support Levels:
Nearest Resistance Levels:
- R1 – 1.1719
- R2 – 1.1841
- R3 – 1.1963
Trading Recommendations:
The EUR/USD pair continues to correct within an upward trend. The global fundamental backdrop remains crucial to the market and remains extremely negative for the dollar. The pair spent seven months in a sideways channel; it seems now is the time to resume the global trend of 2025. The dollar has no fundamental basis for long-term growth. We are currently observing another global correction. When the price is below the moving average, small short positions can be considered, with targets of 1.1633 and 1.1594, based on technical factors and the complex geopolitical situation. Above the moving average line, long positions remain relevant with targets of 1.1963 and 1.2085.
Explanations for Illustrations:
- Linear regression channels help determine the current trend. If both are directed the same way, it indicates a strong trend.
- The moving average line (settings 20,0, smoothed) defines the short-term trend and trading direction.
- Murray levels are target levels for movements and corrections.
- Volatility levels (red lines) indicate a probable price channel in which the pair will spend the next day, based on current volatility indicators.
- CCI indicator – entering the oversold area (below -250) or the overbought area (above +250) indicates an approaching trend reversal in the opposite direction.
