The EUR/USD currency pair continued trading on Monday with a slight upward bias and low volatility. As we warned, volatility is expected to be low on Monday due to the absence of significant fundamental events and macroeconomic releases. Christine Lagarde delivered a speech in the evening, but from our perspective, nothing significant was said.

The European Central Bank has, in fact, already completed its monetary policy easing cycle, so this factor has virtually no impact on the euro exchange rate. Previously, when a rate cut could occur at any meeting (and in fact, the ECB did cut rates at each meeting), inflation data or Lagarde's speeches (as well as her colleagues') had great significance. But only informational significance. Why only informational? As of 2025, the euro has been rising, while the ECB has been cutting the key rate. Nevertheless, inflation could have hinted at what the regulator might do at the next meeting, and ECB Monetary Committee members might openly hint at a future decision. And who knows, maybe the dollar would have fallen even further if the ECB hadn't engaged in easing at nearly every meeting.

Therefore, today's inflation report has almost no significance for the market. If inflation rises to 2.1% or higher, what will that mean for the ECB's monetary policy outlook? Only that the rate will not be cut again in the near future. But what difference does this make for the euro, if it continues to rise regardless of this factor?

If inflation comes in at 2%, the market will have nothing to react to, as forecasts are predicting inflation at 2% for August. If, by some miracle, the Consumer Price Index declines in August, this will increase the likelihood of seeing one or even two more rate cuts by the end of the year. But again, what difference does this make for the euro, given that it has been ignoring the ECB's policy easing all year?

If we take into account German inflation (published last week), a higher-than-expected value can be expected. This could potentially support the euro, which would come as no surprise. In our view, the main factors for the EUR/USD pair remain the same global issues tied to Donald Trump and his policies. Currently, it is evident that the market is on hold. Perhaps it is the calm before a new storm. And the new storm holds nothing good for the dollar. For now, we do not even consider a possible rise in the American currency, as there are no hypothetical reasons for it.

From a technical point of view, we have observed a flat (sideways) market in recent weeks, and it is still too soon to say whether it has ended. The latest bullish divergence clearly indicates a resumption of the upward trend. However, anything could happen this week due to the importance of the macroeconomic background in the US.

The average volatility of the EUR/USD currency pair over the last five trading days as of September 2 is 63 pips, which is characterized as "average." We expect the pair to move between the levels of 1.1635 and 1.1761 on Tuesday. The linear regression channel's upper band is pointed upwards, which continues to indicate an upward trend. The CCI indicator entered the oversold zone three times, signaling the potential resumption of the upward trend. 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 dollar is still under strong pressure from Donald Trump's policies, as he is not planning to "stop at what has been achieved." The dollar has grown as much as it could, but now it seems it is time for a new round of a prolonged decline. If the price is below the moving average, small shorts can be considered with targets of 1.1635 and 1.1597. Above the moving average, long positions remain relevant with targets at 1.1761 and 1.1780 in continuation of the trend. Currently, the market remains in a flat with approximate borders at the Murrey levels of 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.