EUR/USD: Dollar Dominance Report — May 7, 2026 [RISK ON]

REGIME: The current BULLISH stance on EUR/USD is driven by the Alphameter's RISK-ON episode regime, where a score of +69/100 indicates a strong risk-on environment, fueled by a falling dollar, which directly contributes to a higher risk-on score, given DXY's inverted role as a core Alphameter indicator. SENTIMENT DRIVER: The Iran war threatening a jet fuel shortage, as reported by Yahoo Finance, is the primary headline catalyst driving EUR/USD price action, as it raises concerns about global economic stability, potentially weakening the dollar and boosting the euro as a risk-on alternative. ANALYSIS: Through the "Dollar Dominance Report" lens, the current EUR/USD price action suggests that capital is rotating into risk-on euros, driven by dollar weakness, which is consistent with the Alphameter's backtest data showing EUR/USD gains of +6.0%/yr during risk-on episodes, and the fact that the pair is currently trading 0.6% above its 200-day SMA, indicating a bullish trend, with the 7d and 30d changes of +0.2% and +1.7%, respectively, further supporting this view. RISK FACTORS: Two specific catalysts that could flip the signal BEARISH for EUR/USD are a sudden spike in DXY above 105, indicating a safe-haven dash into dollars, and a significant upward revision in the upcoming Jobless Claims estimate, potentially signaling a stronger US labor market and, by extension, a stronger dollar, which would undermine the current risk-on environment and potentially drive EUR/USD below its 200-day SMA. WATCH: The 2026-05-08 NFP — Non-Farm Employment Change event is a key upcoming macro event to watch, as a significant deviation from the estimated 65K jobs added could impact the dollar's strength and, in turn, influence EUR/USD price action, with a stronger-than-expected reading potentially boosting the dollar and pressuring EUR/USD.