empty
21.05.2025 07:46 AM
EUR/USD Overview – May 21: The Theater of Chaos and Absurdity Continues

This image is no longer relevant

The EUR/USD currency pair moved sluggishly on Tuesday, which was not surprising given the absence of news. Monday didn't bring much in the way of important news either, yet the market latched onto the downgrade of the U.S. credit rating and noted the Federal Reserve's increased purchases of government bonds. However, in our opinion, the dollar's decline on Monday may have occurred even without a formal reason.

The market is consistently looking for excuses to sell the dollar, yet such reasons are not found daily. Yes, the U.S. economy will undoubtedly suffer from Donald Trump's actions, and his vision of a bright future is far from guaranteed. But how much longer will the dollar keep falling based on a factor that hasn't fully materialized yet? For two years, the market has been selling the dollar in anticipation of monetary easing by the Fed, but that easing still hasn't happened. Who pays the price for these misguided expectations? Even trying to follow the market's recent logic makes it hard to explain the movements we've been seeing.

The market continues to be driven more by emotion than logic, mainly reacting to internal sentiment. Despite growing economic problems in the U.S. and the looming threat of a recession, U.S. stock indices are rising steadily and approaching record highs. And as for Bitcoin—well, that defies explanation altogether. We analyze it daily, and who can explain why Bitcoin has gained $30,000 in a month? Are we again blaming it on a "rise in risk appetite"? That can be used to explain anything.

Four months ago, there was at least a clear fundamental foundation that could be used to build a trading strategy. Even if flawed, it offered structure. Now we observe that the European Central Bank has cut rates seven times and is preparing for an eighth, yet the euro isn't falling. The ECB might push the rate below neutral, while the Fed hasn't even hinted when it might resume easing—yet the dollar is plunging and the euro is climbing.

The market focuses solely on the "Trump factor," which makes any fundamental analysis one-sided. That means certain factors must be ignored, while others are exaggerated. From this standpoint, the dollar could easily resume its decline, and no one would be surprised. Everyone would say "because of Trump," and that explanation would suffice. If the dollar starts recovering, no one will be surprised either—after all, the trade war is de-escalating, so it all makes sense. Under Trump, the chaos and absurdity in the markets have multiplied.

This image is no longer relevant

The average volatility of the EUR/USD pair over the last five trading days as of May 21 is 85 pips, which is considered "average." We expect the pair to move between 1.1169 and 1.1339 on Wednesday. The long-term regression channel points upward, indicating a short-term uptrend. The CCI indicator dipped into oversold territory, which signals a trend continuation in an uptrend. A bit later, a bullish divergence formed, triggering a fresh upward wave.

Nearest Support Levels:

S1 – 1.1230

S2 – 1.1108

S3 – 1.0986

Nearest Resistance Levels:

R1 – 1.1353

R2 – 1.1475

R3 – 1.1597

Trading Recommendations:

EUR/USD is attempting to resume an uptrend. For several months, we have consistently maintained our expectation of a decline in the euro, which still stands. The dollar fundamentally has no reason to fall, except for Trump's policies. However, since Trump now aims for a trade truce, the trade war factor supports the dollar, which could return to its starting position around 1.03 in the longer term. Under current conditions, we do not consider long positions appropriate. If the price is below the moving average, short positions targeting 1.1169 and 1.1108 remain relevant.

Explanation of Illustrations:

Linear Regression Channels help determine the current trend. If both channels are aligned, it indicates a strong trend.

Moving Average Line (settings: 20,0, smoothed) defines the short-term trend and guides the trading direction.

Murray Levels act as target levels for movements and corrections.

Volatility Levels (red lines) represent the likely price range for the pair over the next 24 hours based on current volatility readings.

CCI Indicator: If it enters the oversold region (below -250) or overbought region (above +250), it signals an impending trend reversal in the opposite direction.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Stanislav Polyanskiy
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

GBP/USD Overview – July 15: U.S. Budget Turns Surplus — What's Next?

The GBP/USD currency pair continued to trade lower on Monday, despite the lack of any strong fundamental reasons for such a move. Of course, one can always find or even

Paolo Greco 03:58 2025-07-15 UTC+2

EUR/USD Overview – July 15: No Agreement Signed with the EU. Mexico Gets Caught in the Crossfire

The EUR/USD currency pair traded very calmly throughout Monday, as the market continued to ignore Trump's tariff hikes. If the euro remains flat while the British pound is actively falling

Paolo Greco 03:58 2025-07-15 UTC+2

The Budget Is Now in Surplus, but the National Debt Isn't Falling

Last Friday, the U.S. Treasury Department announced the first budget surplus since 2017. Many in the market may have interpreted this as great news for the dollar

Chin Zhao 00:48 2025-07-15 UTC+2

European Commission Counts on Negotiations – the Euro Is in No Hurry to Decline

Trade negotiations between the EU and the U.S. remain in the spotlight, and their outcome is expected to have the greatest impact on the future trajectory of the euro. From

Kuvat Raharjo 00:48 2025-07-15 UTC+2

EUR/USD: Will Trump Fire Powell?

Will Donald Trump remove Federal Reserve Chair Jerome Powell from office? It's not a hypothetical question. On the surface, the answer seems obvious — "no." Following the U.S. Supreme Court's

Irina Manzenko 00:48 2025-07-15 UTC+2

The Dollar Demands a Resignation

The Powell Effect —much like the butterfly effect—is real. Markets are already betting on a sharp easing of monetary policy immediately after the Federal Reserve Chair steps down

Marek Petkovich 00:48 2025-07-15 UTC+2

UR/USD. Analysis and Forecast

On Monday, the EUR/USD pair dropped to a two-week low, but no significant sell-off followed, and during the early European session, the pair held above the 1.1650 level. The weakening

Irina Yanina 19:05 2025-07-14 UTC+2

EU Prepares to Retaliate

Over the weekend, it was revealed that the United States will impose 30% tariffs on all goods from the European Union starting August 1. In response, the EU is preparing

Jakub Novak 11:21 2025-07-14 UTC+2

Trump Continues to Pressure U.S. Trade Partners (Potential Resumption of USD/JPY and Ethereum Growth)

The United States, through its president, continues to exert economic—and arguably geopolitical—pressure on its trade partners, which is having a ricochet effect on global trade and financial markets. But, oddly

Pati Gani 10:00 2025-07-14 UTC+2

Do Markets Like Tariffs?

Everyone sees what they want to see. For Donald Trump, the S&P 500 rally to record highs is proof that the market likes tariffs. For investors, it's a sign

Marek Petkovich 09:06 2025-07-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.