The EUR/USD pair remains within a weak corrective pullback, which cannot yet be considered complete. On Monday, it became known that Iran attacked a US destroyer in the Persian Gulf near the Strait of Hormuz. Official Washington immediately stated that the ship was not sunk, but where the missiles struck—or whether they hit the US Navy vessel at all—remains unclear. Shortly afterward, tensions in the Middle East escalated further, as Iran launched missiles at one of the US allies—the UAE—for the first time in more than a month. According to local reporters, an oil refinery in Fujairah was hit. Then events began to unfold at an extremely rapid pace. Markets are struggling to process the flow of incoming information. Today it was reported that Iran and the United States are close to a so-called framework agreement. What does this mean? It reflects both sides' readiness to engage in closer negotiations and to discuss key issues in more detail. In other words, Tehran and Washington aim to reach an agreement that would later allow them to conclude a broader deal on peace and Iran's nuclear status. According to rumors, Iran is willing to make significant concessions on the nuclear issue—but it should be emphasized that these are only rumors. Today, oil briefly dropped to $100 per barrel in response to news of a framework agreement, but quickly rebounded to $108–110. This likely indicates that new information entered the market, partially or fully contradicting the initial reports.
In the current situation, traders are left to wait either for the fulfillment of imbalance level 13 or for the formation of new bullish patterns. I continue to view the trend as bullish. Last week, bulls fell just short of completing imbalance 13 and generating a new buy signal. There are no bearish patterns at the moment, so there are no clear grounds for selling the pair. The previous buy signal from imbalance 12 worked well, with the euro gaining approximately 270 points. Now it is time for new signals and a potential continuation of growth.
It is worth emphasizing once again that the entire rise of the US dollar from January to March was driven solely by geopolitics. As soon as the United States and Iran agreed to a ceasefire, bearish traders stepped back, and for over a month now, bulls have dominated. At present, the truce remains fragile but intact. I have repeatedly stated that I do not believe the bullish trend has ended, despite the break of important structural lows and the conflict in Iran. The price movement of the past three months could turn into a bearish trend if geopolitics continues to deteriorate. However, markets often price in the most pessimistic scenarios in advance, trying to anticipate extreme outcomes. Therefore, it is possible that traders have already fully priced in the geopolitical conflict in the Middle East. If so, bearish pressure may remain limited for an extended period.
The overall technical picture is currently clear. The bullish trend persists but requires support. This week, support may come from US labor market data, unemployment figures, job openings, ISM business activity reports, as well as geopolitical developments. The week began with new missile strikes in the Middle East, but by Tuesday it became clear that full-scale escalation had not materialized.
The economic backdrop on Wednesday was almost nonexistent. A few hours ago, a fairly positive US ADP labor market report was released, showing that 109 thousand new jobs were created in April—above market expectations. However, amid ongoing geopolitical turbulence, few market participants paid attention to the report. Traders have largely been ignoring economic data for several months, and the ADP report is not significant enough to outweigh geopolitical developments.
There are still many reasons for bullish momentum in 2026, and even the outbreak of conflict in the Middle East has not reduced them. Structurally and globally, Trump's policies—which contributed to the dollar's significant decline last year—have not changed. In the coming months, the US dollar may occasionally strengthen due to risk aversion, but this would require continuous escalation in the Middle East. I still do not believe in a sustained bearish trend reversal. The dollar has received temporary support, but what long-term drivers would sustain bearish pressure?
Economic calendar for the US and the Eurozone:
On May 7, the economic calendar contains two entries, neither of which can be considered significant. The impact of the news background on market sentiment on Thursday is expected to remain weak. The market awaits further geopolitical developments.
EUR/USD forecast and trading advice:
In my view, the pair remains in the process of forming a bullish trend. The information backdrop changed sharply three months ago, but the trend cannot be considered invalidated or complete. Thus, in the near term, bulls may continue to push higher if geopolitics does not shift toward renewed escalation.
Traders previously had an opportunity to open long positions based on the signal from imbalance 12, and the upward movement may continue toward the yearly highs. Imbalance 13 has also formed and may generate a new bullish signal soon. For uninterrupted growth of the euro, the conflict in the Middle East needs to move toward a stable peace, and some signs of de-escalation are already emerging. Bulls currently lack sufficient support for a new impulse, but they may gain it during the week.
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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