The EUR/USD currency pair should "come back to life" in the coming week. Over recent weeks, volatility has been low, and trending moves have been nearly absent. In fact, the decline in market activity is very noticeable in the chart below: over the last 14 trading days, daily volatility has exceeded 73 pips only three times. Most of the time, it was just 50-60 pips a day, despite a fundamental backdrop that continues to put strong pressure on the dollar.

Recall that just last week, Donald Trump once again raised tariffs and could introduce a lot of new duties in the coming weeks, since he still cannot secure a ceasefire between Ukraine and Russia. This is an issue of great importance for Trump, as he is keen to win the Nobel Peace Prize. We believe he might still obtain it even without a truce between Russia and Ukraine, but his chances are indeed higher if such a truce is achieved.

Since Moscow and Kyiv are still not rushing to the negotiating table, Trump may implement tariffs and sanctions against both "troublemakers." In addition, partners of the Kremlin who are active in buying oil, gas, and weapons may also suffer. India is already affected, but Russia's trade with India is not the only one that is impacted. Thus, a potential escalation in the trade war is possible already in September.

Regarding the standoff between Trump and the Federal Reserve, this conflict also continues to intensify each week. There is no reason to expect that Trump will back off from the Fed or let it perform its duties as per the Constitution.

Therefore, we still see no reason for the US dollar to strengthen in the medium term. The situation could even worsen if the Fed starts to cut rates in September. And there doesn't need to be much justification for that. First, US inflation is growing only very slowly. Second, the US labor market has shown disappointing results over the past three months. Third, the easing process has been on pause since last December.

Next week, at least two speeches are scheduled with European Central Bank President Christine Lagarde, and at one of them, she may comment on the August inflation report, which will be released on Tuesday. If EU inflation begins to accelerate again (as in Germany, where it rose to 2.2%), this would be a strong reason to end ECB rate cuts — not a strong sense, but an additional supportive factor for the euro. Additionally, the third estimate of Q2 GDP will be released on Friday. The Eurozone's growth rate may be revised from the current 0.1%, but it will be very weak in any case. Strong support for the euro based on European news alone is unlikely. Much more important will be US data on the labor market, unemployment, and ISM indices — and there, the dollar is also unlikely to get much support.

The average volatility of the EUR/USD pair over the last five trading days as of August 30 is 77 pips, which is considered "average". We expect movement between 1.1608 and 1.1762 on Monday. The linear regression channel's upper band is pointing upward, still indicating an uptrend. The CCI indicator entered the oversold area three times, signaling the potential resumption of the uptrend. A new bullish divergence has formed.

Nearest Support Levels:

S1 – 1.1658

S2 – 1.1597

S3 – 1.1536

Nearest Resistance Levels:

R1 – 1.1719

R2 – 1.1780

R3 – 1.1841

Trading Recommendations:

The EUR/USD pair may resume its upward trend. The US currency remains under powerful pressure from Trump's policies, who show no intention of "stopping here." The dollar rose as much as it could, but now it seems time for the next leg of a protracted decline. If the price is below the moving average, look for minor shorts targeting 1.1608 and 1.1597. Above the moving average, long positions targeting 1.1719 and 1.1755 in continuation of the trend remain relevant. Currently, the market is forming a flat with approximate boundaries at the Murrey levels 1.1597 and 1.1719.

Chart Elements Explained:

• Linear regression channels help determine the current trend. If both channels point in the same direction, the trend is strong.
• The moving average line (settings 20,0, smoothed) indicates the short-term trend and trade direction.
• Murray levels serve as target levels for moves and corrections.
• Volatility levels (red lines) are the likely price channel for the next day, based on current volatility readings.
• The CCI indicator: dips below -250 (oversold) or rises above +250 (overbought) mean a trend reversal may be near.