EUR/USD remains within a local bearish impulse, which still has the potential to develop into a broader bearish trend. Despite the pair's decline in recent months, I continue to believe that the broader bullish trend remains intact. Even the chart above shows that price action over the past year has largely been moving sideways. Therefore, the bullish trend that began after Donald Trump took office cannot yet be considered complete. However, if developments continue along the same path as they have in recent weeks, that trend could eventually come to an end.
As a reminder, on June 17, Iran and the United States signed a framework agreement intended to fully reopen the Strait of Hormuz and serve as the starting point for negotiations on Iran's nuclear program. That outcome might have been achievable if Israel had stopped its attacks on Lebanon, clashes near the Strait of Hormuz had ceased, and all parties had strictly adhered to the agreement. However, the market currently has little confidence that any new agreement between Iran and the United States will bring the conflict to a lasting end rather than simply create another temporary pause.
Even so, it remains extremely difficult to determine current market sentiment and expectations regarding geopolitical developments. For now, it is more practical to rely on the technical picture. From a Smart Money perspective, Imbalance 18 remains the key technical pattern. Its invalidation would favor a renewed bullish advance, while a rejection from this imbalance could trigger another wave of bearish pressure.
In recent weeks, geopolitics has taken a back seat to the Federal Reserve, but it could quickly return to the forefront. Tehran and Washington signed a memorandum of understanding, extended the ceasefire by 60 days, and began working toward the full reopening of the Strait of Hormuz and a comprehensive nuclear agreement. Nevertheless, the expected weakening of the U.S. dollar following the easing of geopolitical tensions never materialized. Likewise, the euro failed to benefit from the ECB's tighter monetary policy. Instead, bears remained firmly in control throughout the week despite both the fundamental and geopolitical backdrop. Now that geopolitical developments are once again disappointing the market, renewed bearish pressure would hardly come as a surprise. Even so, I do not believe the bulls are in a position that justifies another broad retreat.
The current technical picture continues to point to the bearish impulse that began on April 17. Bearish Imbalance 17 was never fully mitigated and therefore failed to generate a valid sell signal. Last week, Bearish Imbalance 18 formed and may trigger a market reaction as early as today or tomorrow. Only if Imbalance 18 is invalidated will I once again expect the euro to resume its advance, which, in my view, would be the more technically justified scenario. In that case, I would also look for bullish Smart Money patterns, as I still consider the broader bullish trend to be intact.
Tuesday's economic data was not the reason behind the euro's decline. Germany released inflation, unemployment, and retail sales figures. Retail sales for May exceeded market expectations, the unemployment rate remained unchanged, and inflation slowed to 2.3%, down 0.3 percentage points from June. As a result, inflation across the eurozone may also ease slightly, potentially allowing the ECB to pause its monetary tightening cycle in July. From the euro's perspective, this would once again represent a negative development.
The bulls still have numerous fundamental arguments in their favor in 2026, and the Middle East conflict has done little to diminish them. Structurally and fundamentally, the policies introduced by Donald Trump, which contributed to the sharp weakening of the U.S. dollar last year, have not changed. At present, I do not see strong long-term factors supporting the U.S. dollar despite the FOMC's hawkish stance. EUR/USD is approaching a cluster of significant lows and swing points where liquidity may be taken. Such a liquidity sweep could become the catalyst for a reversal of the current bearish impulse.
Economic Calendar (U.S. and Eurozone)
The economic calendar for July 1 contains six scheduled events, at least four of which can be considered important. As a result, macroeconomic developments may influence market sentiment throughout Wednesday's trading session.
EUR/USD Outlook and Trading Recommendations
In my view, the pair remains within the broader process of forming a bullish trend. Although the fundamental backdrop shifted sharply in favor of the bears four months ago, the larger trend cannot yet be considered invalidated or complete. Therefore, the bulls may resume their advance after liquidity is taken below the clearly defined lows. However, opening long positions at this stage is premature. The current bearish impulse should first come to an end, followed by the formation of bullish Smart Money patterns.
At present, traders have two bearish imbalances that may be used as potential areas for initiating short positions. However, I would draw attention to the proximity of four major swing lows, where liquidity may be taken, as well as the relatively weak fundamental justification for the U.S. dollar's recent strength. Consequently, I continue to expect a bullish recovery, but only after receiving clear technical confirmation. Otherwise, it will be more prudent to wait for new sell signals.
*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.
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