Last week, EUR/USD made several attempts to reverse in favor of the euro and resume its upward movement in line with the bullish trend originating from imbalance 13. However, at the moment, it can be said that bullish traders lack sufficient momentum for a renewed advance. The chart structure currently suggests that the reaction to the bullish imbalance was weak and unconvincing, while the reaction to bearish imbalance 15 was clear and precise. Therefore, I believe that the probability of a new bearish attack this week is significantly higher than the likelihood of a renewed bullish advance. The bulls had their opportunity but failed to capitalize on it.
As before, the pair's movement and overall market sentiment will largely depend on geopolitical developments. If Tehran and Washington manage to sign a memorandum of understanding this week and make progress in negotiations regarding Iran's nuclear program, bullish traders will find it much easier to regain control, allowing both the euro and the pound to resume their upward trajectories. However, the problem is that the chances of such an optimistic outcome are becoming increasingly limited with each passing day.
The United States and Iran have extended the ceasefire for another 60 days, but the practical significance of this extension remains questionable if the Strait of Hormuz remains closed and a long-term peace agreement is unlikely to be signed in the near future. The parties may continue negotiations for years, but that offers little comfort to traders and financial markets. Moreover, it is difficult to speak of a complete cessation of hostilities in the Persian Gulf region, as the United States and Iran continue to carry out strikes against each other's assets and vessels on a regular basis.
Under the current circumstances, traders can only wait for either a renewed reaction to imbalance 13, which remains the last bullish pattern within the current bullish impulse, or for its invalidation. If the pair's decline is viewed as a corrective pullback, it may well conclude within imbalance 13. However, without geopolitical support, bullish traders are likely to face significant difficulties in launching a new advance, which has already been evident over the past two weeks.
Conversely, if the current movement marks the beginning of a new bearish trend, then traders should expect negotiations to fail and the conflict to intensify once again. In this case, a valid sell signal has already formed within bearish imbalance 15.
Once again, it is worth emphasizing that the U.S. dollar's appreciation between January and March was driven almost entirely by geopolitical developments. As soon as the United States and Iran agreed to a ceasefire, bearish traders immediately retreated, and bullish traders dominated market activity for more than a month. At present, however, the probability of a comprehensive agreement is declining once again.
The market remains highly skeptical of reports suggesting an imminent resolution of the conflict or a breakthrough agreement between Iran and the United States. To be more precise, an agreement will likely be signed eventually. However, "eventually" is not the type of catalyst required to support a sustained rally in EUR/USD.
The overall chart structure remains relatively straightforward. The bullish trend remains intact but is in urgent need of support. Ideally, that support should come from geopolitics, with Iran and the United States reaching at least a framework agreement before continuing discussions regarding Iran's nuclear program. Without a positive news backdrop, a renewed rally in the euro appears unlikely.
Monday's economic calendar offered little of interest to traders. Germany released its Retail Sales report in the morning, while the United States published the ISM Manufacturing PMI later in the day. Neither report generated a meaningful market reaction.
There are still numerous reasons for bullish traders to remain active in 2026, and the conflict in the Middle East has done little to reduce their significance. Structurally and fundamentally, the policies implemented by Donald Trump, which contributed to the substantial decline of the U.S. dollar last year, have not changed.
Over the coming months, the dollar may occasionally strengthen as investors seek safe-haven assets during periods of elevated uncertainty. However, this factor requires continued escalation in the Middle East to remain effective. I still do not believe that a sustained bearish trend in EUR/USD has begun. The dollar has received temporary support from the market, but it remains unclear what factors could provide bearish traders with long-term momentum.
News Calendar for the United States and the Eurozone
Eurozone
- Consumer Price Index (CPI) – 09:00 UTC
United States
- JOLTS Job Openings – 14:00 UTC
The June 2 economic calendar contains two noteworthy releases, both of which can be considered reasonably important. Economic data may influence market sentiment on Tuesday, although a strong reaction appears unlikely.
EUR/USD Forecast and Trading Recommendations
In my view, the pair remains in the process of forming a bullish trend. The fundamental backdrop changed sharply three months ago, but the broader trend cannot yet be considered invalidated or completed. Therefore, bullish traders may still be able to resume their advance in the near term if geopolitical developments provide even modest support.
Traders had opportunities to open long positions based on the signal from imbalance 12 as well as the signal from the order block. The upward movement may resume toward the yearly highs originating from imbalance 13. However, it is now crucial that bulls retain market control.
For the euro to continue rising without significant obstacles, the Middle East conflict must move toward a stable and lasting peace. A breakdown in negotiations, rejection of a framework agreement by either side, or another violation of the ceasefire could strengthen bearish pressure. A sell signal has already formed within bearish imbalance 15. If geopolitical conditions fail to improve this week, a decline toward the 1.1500 level will become increasingly likely.
