The EUR/USD pair spent two weeks trading within Imbalance 13, attempting to form a buy signal within that zone. However, the bulls failed to find sufficient grounds for a new advance, and Friday's Nonfarm Payrolls report effectively invalidated their efforts. As a result, the pair fell well below Imbalance 13, rendering this pattern invalid. The only active signal that remains is the one formed within Imbalance 15, but it is a bearish signal within what is still considered a bullish trend.
Naturally, I am not suggesting that readers avoid buying the U.S. dollar. The U.S. currency has been in demand throughout 2026, which means its appreciation may continue. However, in my view, once the conflict in the Middle East is resolved, the dollar will lose a significant portion of its appeal among traders.
Unfortunately, there are still no signs that the conflict in the Middle East is nearing an end, and Tehran and Washington remain unable to find common ground. On Monday, Iran carried out its first strikes against Israel in two months in response to Tel Aviv's attack on Beirut, once again putting negotiations and a potential peace agreement at risk. However, such developments are no longer particularly surprising, as both sides regularly carry out strikes and appear more concerned with avoiding any display of weakness than with preserving the negotiation process. As a result, the dollar continues to enjoy preference among traders due to geopolitical considerations.
In the near future, market sentiment and the direction of the pair will continue to depend primarily on geopolitical developments. If Tehran and Washington ultimately sign a memorandum of understanding, extend the ceasefire, and make progress on the nuclear issue, the bears may be forced to retreat, allowing the euro and the pound to resume their upward movement. However, the probability of such an optimistic scenario appears to be declining with each passing day.
Under the current circumstances, traders may focus on bearish patterns. A new bearish imbalance may be formed by the end of today's session. However, if an agreement between Iran and the United States is eventually reached, the euro could resume its advance in line with the broader bullish trend despite the presence of bearish patterns. At this stage, however, it remains unclear how far the euro may decline before that occurs. The current technical picture now provides considerably stronger support for the U.S. dollar.
Once again, I must emphasize that the entire rally in the U.S. dollar between January and March was driven primarily by geopolitical developments. As soon as the United States and Iran agreed to a ceasefire, bears immediately retreated, and bulls dominated trading for more than a month. At present, the likelihood of reaching an agreement appears to be declining once again, while the market remains highly skeptical of any reports suggesting a quick resolution to the conflict or a comprehensive agreement between Iran and the United States. Consequently, geopolitics continues to exert underlying pressure on EUR/USD.
There was no meaningful economic data on Monday. The first notable event of the week will arrive on Wednesday with the release of the U.S. inflation report. In the eurozone, the European Central Bank will hold its policy meeting on Thursday, which could support the bulls, as the ECB is highly likely to decide in favor of further monetary tightening.
Bulls still have numerous reasons to remain active in 2026, and the outbreak of conflict in the Middle East has not significantly reduced them. From a structural and long-term perspective, Trump's policies, which contributed to the sharp decline of the dollar last year, have not fundamentally changed. In the coming months, the U.S. dollar may periodically strengthen due to risk-off flows, but this factor requires continued escalation of the conflict in the Middle East. I still do not believe in the emergence of a sustained bearish trend for EUR/USD. The dollar has received temporary support from the market, but what factors can provide bears with long-term momentum?
News Calendar for the United States and the Eurozone:
- Germany – Industrial Production (06:00 UTC).
- United States – Existing Home Sales (14:00 UTC).
The economic calendar for June 8 contains only two secondary events. Therefore, the impact of the economic backdrop on market sentiment on Tuesday is expected to be minimal.
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, bulls may well resume their advance in the near term if they receive even modest support from geopolitical developments.
At present, traders can only maintain short positions initiated from Imbalance 15 and wait for new patterns to emerge. The decline in the pair is being prolonged by objective factors, although without the strong U.S. labor market and unemployment data, the support zone of Imbalance 13 would most likely have held. However, it failed to hold, giving bears an opportunity to launch a more substantial offensive. Geopolitics remains the key driver.
