EUR/USD began the new week lower. Although no significant new developments had emerged to negatively affect the euro, traders were already selling the currency amid concerns about potential risks. Over the weekend, large-scale protests against the rising cost of living took place in several European countries, accompanied by riots and property damage. The Fed is scheduled to meet on Wednesday evening. Immediately after the US congressional elections on November 4, Donald Trump may order military operations against Iran to resume. Traders are once again responding to these three factors by reducing exposure to risk and increasing demand for the US dollar as a safe-haven currency. This appears to be the main reason for the dollar's renewed strength at the start of the week.
The market's response may be justified, but it also appears to reflect a selective assessment of the available information. Tensions remain elevated not only in France and Italy, the Middle East, and Ukraine, but also in the foreign exchange market. Uncertainty is weighing on market sentiment and encouraging investors and traders to adopt more cautious positions.
It is worth noting that the Fed's current monetary policy stance is not particularly hawkish. Over the past two weeks, no FOMC member has advocated tightening monetary policy in October. Therefore, the Fed is almost certain to leave interest rates unchanged this week. As a result, there are no economic grounds, in my view, for the US dollar to rise. The ECB will also hold a meeting and may likewise leave interest rates unchanged. Yet the euro has been declining for more than a month—and continues to fall.
At this point, it is also impossible to say that the euro's decline has been halted or has come to an end. Imbalance 24 remains valid, and the price may react to it, generating a new sell signal. The bears have pushed too far, and stopping them will not be easy. The fact that the market has largely ignored news supporting the euro for more than a month does not mean that the euro must now rise. First, Imbalance 24 needs to be invalidated, and the bulls need to form their own bullish patterns. This would require a sharp upward move in the euro, but the bulls continue to show weakness and a lack of momentum.
In September, the FOMC not only raised interest rates but also signaled its willingness to continue tightening monetary policy. This was enough to trigger a large-scale bearish advance. However, even after the Fed's September tightening and a possible further move in December, it would be incorrect to conclude that the euro has received no positive news during this period. The market is simply ignoring most of it.
Overall, the fundamental backdrop, in my view, continues to favor the bulls. Although the Fed has adopted a tighter monetary policy stance, this is not the only factor determining exchange rates. The European Union also faces problems, but the key point is that problems exist everywhere, while only the euro continues to decline. Both central banks are pursuing tighter monetary policies, yet only the dollar is rising. Nevertheless, it is not advisable to expect the euro to rise before bullish signals emerge. Buying the euro in advance is also not recommended.
The current technical picture clearly indicates that bearish momentum remains intact. The only relevant pattern at present is Imbalance 24, which could be tested in the near future. The bulls' only opportunity may lie in a liquidity sweep below the 1.1066 low. However, opening long positions requires more confirmation than a liquidity sweep alone.
There was no significant economic data on Monday. However, traders are once again favoring safe-haven assets, allowing the dollar to rise.
The bulls still have numerous reasons to launch an advance in 2026. Structurally and globally, Trump's policies—which led to a significant decline in the dollar last year—have not changed. At present, I see no major factors supporting the US dollar, despite the FOMC's hawkish stance. Geopolitical risks and the tense situation in Europe are currently weighing on the euro.
US and EU Economic Calendar:
- United States – Change in Durable Goods Orders (12:30 UTC).
- United States – New Home Sales (14:00 UTC).
- European Union – Speech by ECB President Christine Lagarde (17:00 UTC).
The economic calendar for October 27 contains three events. Economic data may influence market sentiment on Tuesday.
EUR/USD Forecast and Trading Advice:
In my view, the pair remains in the process of forming a bullish trend that has been taking a year-long corrective pause. The fundamental backdrop shifted sharply in favor of the bears eight months ago, but the trend that has been in place for four years cannot yet be considered invalidated or complete. The bulls may resume their advance before the end of the year, but their only tangible opportunity at present is the 1.1066 low established in June last year. The bears received a new sell signal at Imbalance 19. At this point, existing short positions should be kept open. A new sell signal may form at Imbalance 24. Since a corrective pullback is possible, traders may consider taking partial profits on short positions.
