The EUR/USD pair has started the new trading week rather calmly, without a downward gap or sharp drops. This seems unexpected, given the significance of Friday's events and the new escalation in the Middle East. Moreover, buyers of EUR/USD are currently trying to seize the initiative, keeping the pair above the key support level of 1.1580 (the middle Bollinger Bands line on both the D1 and W1 timeframes).

All of this suggests that the geopolitical agenda — at least in its current form — can no longer exert decisive influence on the dynamics of the greenback and, consequently, on the EUR/USD pair.

On Sunday, the United States struck Iran for the first time since the end of July, after which Tehran attacked U.S. bases in Jordan. According to media reports, American forces struck two missile installations on Larak Island in the Strait of Hormuz, stating that the Iranian military was preparing to use these missiles to disrupt shipping. Almost immediately, Tehran responded by attacking American facilities in Jordan.

Thus, the parties exchanged strikes once again, particularly in the strategically important Strait of Hormuz. One might expect such a scenario to become a powerful driver for demand for the dollar as a traditional safe haven. However, the currency market, as evidenced by the movement of EUR/USD, is not hurrying to draw conclusions. In contrast, the oil market reacted more straightforwardly: Brent crude rose nearly 5% at one point, exceeding the psychologically significant $90 mark. This is quite understandable given the importance of the Strait of Hormuz for the transportation of "black gold."

The EUR/USD pair, on the other hand, shows noticeably greater resilience to stress. In my opinion, this is largely due to differing interpretations of the events taking place. The oil market responds directly to the threat of supply disruptions, while the currency market attempts to assess the prospects of the conflict itself. To date, the exchange of strikes is perceived by traders as another element of pressure, a "raising of stakes", and bargaining ahead of a potential negotiation round through mediators. Moreover, the diplomatic channel is not completely closed, and the current escalation remains somewhat limited.

Additionally, the greenback faces another potential issue unrelated to geopolitics. Important macroeconomic reports will be released in the United States in the coming days, which could significantly alter expectations regarding further actions by the Federal Reserve. These include the ISM indexes (first in the manufacturing sector, then in the services sector), the JOLTS data, the ADP report, and finally, the NFP.

Given recent events, the U.S. labor market may become the main test for the dollar. If the August Nonfarm Payrolls reflect the trajectory of July's report (which showed a 23,000-job reduction in employment and a decline in the labor force participation rate), the greenback will face significant pressure. Even despite Kevin Warsh's unexpectedly hawkish speech at Jackson Hole on Friday.

Yes, on the one hand, the Fed chair emphasized ongoing inflation risks, thereby amplifying hawkish expectations for the central bank's future actions. However, there is also an important caveat. Warsh made it clear that "all options are on the table," and the final decision will depend on incoming data.

This is a crucial stipulation — if Nonfarm Payrolls again demonstrate cooling in the labor market, and ISM indexes simultaneously show the first signs of slowing business activity, Friday's rhetoric from Warsh could turn against the greenback.

In effect, the Fed chair left the door open to any scenario, emphasizing that the central bank's future decisions depend on incoming economic data. When looking solely at the inflation component, this statement indeed works in the dollar's favor: persistent price pressures strengthen arguments for tighter policy. However, if weak labor market data and signs of slowing economic activity are added to this, the balance of risks shifts in the opposite direction. In that case, this data will indicate not only the need to fight inflation but also the necessity to consider risks to employment and economic growth.

All this suggests that the bearish scenario for the EUR/USD pair has clearly stalled. The spike in geopolitical tensions did not help the dollar. In contrast, the duality of Warsh's rhetoric and the approach of significant macroeconomic releases exerted slight pressure on the greenback, allowing buyers to attempt to counterattack. The key support level for EUR/USD remains at 1.1580 (the middle Bollinger Bands line on both D1 and W1): as long as the pair holds above this level, the bearish scenario remains unconfirmed. Accordingly, short positions should only be considered after a confident break below this level. Otherwise, there is a high probability that EUR/USD will return to the 1.1640–1.1680 range, where the pair traded for almost the entire past week.