The EUR/USD currency pair traded much more calmly on Tuesday than the day before. Donald Trump held back on promises to end the war in the Middle East this time, but knowing Trump, negotiations between Washington and Tehran may indeed be taking place. The problem is that Trump enjoys shocking the markets. He can build tension for weeks (as he did with Greenland) and then pull back. He can say one thing and do completely another. He can remain silent for weeks and then douse the markets with a bucket of cold water. Therefore, it makes little sense to guess what is really happening in the Middle East.

However, the markets do not know how to remain passive. If you can predict future events, it means you can profit from them. This has always been the case. Traders and investors have always tried to anticipate specific events with a certain degree of probability. So now, with Trump announcing negotiations and a possible end to the war, it means that the American president is at least open to a ceasefire. Of course, this is a rather hypocritical ceasefire. For three weeks, the US and its allies bombed Iran, and now it seems they are tired of it and suddenly want peace. Meanwhile, Iran has reciprocated in kind.

Perhaps Trump understands that achieving the set goals will be impossible, or perhaps the goals have indeed been achieved: nuclear facilities have been destroyed or nearly destroyed. If so, why continue costly military operations that fuel inflation in the US, thereby effectively blocking the monetary easing that Trump desperately needs? Iran also has no desire for the continuation of war; it has endured all strikes on its territory and infrastructure and has maintained its sovereignty and independence. What is the point of continuing to fight against a not-so-wealthy country that has been surviving for decades, not living?

Thus, the likelihood of at least ceasing hostilities is quite high. In recent days, there have even been reports that civilian vessels have started passing through the Strait of Hormuz, and Tehran is simply charging a fee for the passage of tankers. It is difficult to assess how true this is, but as we know, there is no smoke without fire. If the Strait of Hormuz is opened under any conditions, it would already be half a solution to the problem. However, we fear that the entire story about a possible end to the war could be a maneuver by Trump to lull Iran's vigilance and then deliver new strikes. This scenario cannot be ruled out either. Therefore, the euro and the pound received support from geopolitics this week, but we can only talk about an upward trend once there is a real de-escalation of the conflict in the Middle East. The market may return to buying the US currency at any moment if it realizes that Trump has once again misled everyone.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of March 25 is 111 pips and is characterized as "high." We expect the pair to trade between 1.1479 and 1.1701 on Wednesday. The upper linear regression channel has turned downward, indicating a trend reversal. The CCI indicator has entered the oversold area and formed a "bullish" divergence, warning once again of the completion of the downward trend.

Nearest Support Levels:

S1 – 1.1475

S2 – 1.1353

S3 – 1.1230

Nearest Resistance Levels:

R1 – 1.1597

R2 – 1.1719

R3 – 1.1841

Trading Recommendations:

The EUR/USD pair has begun to correct and has a chance of recovery. The global fundamental background remains extremely negative for the dollar. However, for over a month now, the market has focused solely on geopolitics, rendering all other factors nearly insignificant. If the price is below the moving average, short positions can be considered with targets at 1.1475 and 1.1353. Long positions remain relevant if the price is above the moving average line, targeting 1.1963 and 1.2085, but such movement requires the geopolitical backdrop to improve, even slightly.

Explanations for Illustrations:

Linear regression channels help determine the current trend. If both are directed in the same direction, it indicates a strong trend;

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 a probable price channel in which the pair will trade over the next 24 hours based on current volatility readings;

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