The EUR/USD pair reversed in favor of the US dollar, broke through bullish imbalance 14, reacted to bullish imbalance 13, and continued its downward movement. On Monday, Donald Trump encouraged bullish traders with conciliatory rhetoric regarding the Middle East conflict, which immediately triggered growth in the euro. The US president stated that very serious negotiations were currently underway, the outcome of which could end the war and satisfy the American side. In addition, Trump said he was postponing his decision to resume attacks on Iran for several days. The market regained optimism, but only briefly before falling back into uncertainty the following day. Iran did not confirm the existence of negotiations with Middle Eastern countries or the possibility of a near-term agreement, and on Wednesday stated that any new attacks on its territory would result in strikes not only within the region but also beyond it. In effect, Tehran openly warned that any further aggression against Iran could expand the conflict beyond the Middle East and potentially turn it into a global confrontation. As a result, on Tuesday, Wednesday, and even Thursday, traders had little choice but to return to selling. Bullish imbalance 13 is now close to invalidation. A little more pressure, and bears may completely break the current bullish impulse.
Under the current circumstances, traders can only wait either for another reaction from imbalance 13, which remains the final bullish pattern within the current bullish impulse, or for its invalidation. If the pair's decline is viewed as a corrective pullback, then it could reasonably end within imbalance 13. However, without geopolitical support, traders appear unwilling to return to long positions. If the current movement is interpreted as the beginning of a new bearish trend, there were no suitable levels for opening short positions, as the only bearish pattern — imbalance 15 — was never tested.
I must once again point out that the entire appreciation of the US dollar from January through March was driven exclusively by geopolitics. 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 the moment, the ceasefire remains fragile, but negotiations have not completely stopped, and chances for peace still exist. Unfortunately, traders are increasingly losing confidence in a full resolution of the conflict and a lasting agreement between Iran and the United States. More precisely, a deal will probably eventually be signed. However, "eventually" is not sufficient for the market. If, hypothetically, an agreement is reached only a year from now, traders are unlikely to remain optimistic about it today and continue selling the US dollar.
The overall technical picture remains relatively clear. The bullish trend remains intact but urgently requires support. Ideally, that support should come from geopolitics — namely, renewed negotiations between Iran and the United States accompanied by genuine concessions from both sides. Without a positive news backdrop, it will be difficult for the euro to resume growth.
Thursday's economic background once again failed to support bulls and the euro. PMI data for the German and eurozone manufacturing and services sectors came in weaker than market expectations. Although traders often ignore economic releases, it is reasonable to assume that today's economic data contributed to pressure on EUR/USD.
There are still many reasons for bulls to remain active in 2026, and even the outbreak of war in the Middle East has not significantly reduced them. Structurally and globally, Trump's policies — which contributed to the sharp decline in the dollar last year — have not changed. In the coming months, the US currency may periodically strengthen amid risk aversion, but this factor would require constant escalation of the Middle East conflict. I still do not believe in the formation of a long-term bearish trend for EUR/USD. The dollar has received temporary support from the market, but what fundamental factors would allow bears to maintain pressure in the long term?
News Calendar for the US and the Eurozone:
Germany
United States
The May 22 economic calendar contains three events, none of which can be considered particularly important. Therefore, the influence of the economic background on market sentiment on Friday is likely to remain very limited.
EUR/USD Forecast and Trading Advice:
In my view, the pair remains in the process of forming a bullish trend. The information background changed sharply three months ago, but the trend itself cannot yet be considered canceled or complete. Therefore, bulls may resume the upward move in the near term if they receive even modest support from geopolitics.
Traders previously had opportunities to open long positions based on signals from imbalance 12 and the order block. The upward movement may resume toward this year's highs from imbalance 13. However, in the coming days it is important for bulls to maintain control of the market. For uninterrupted euro growth, the Middle East conflict must move toward a sustainable peace, and signs of de-escalation do appear from time to time, although they remain relatively rare. At present, bullish traders still lack sufficient support for a new impulse. The zone for new buying opportunities is 1.1605–1.1649.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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