On Tuesday, the EUR/USD pair declined toward the 38.2% corrective level at 1.1666 but fell short by about 10 points, then reversed in favor of the euro and returned to the 50.0% Fibonacci level at 1.1745. A rebound from this level will favor the US dollar and a renewed decline toward 1.1666. A consolidation above 1.1745 will increase the likelihood of continued growth toward the next corrective level of 61.8% at 1.1824.
The wave situation on the hourly chart currently raises no concerns. The last completed upward wave broke the previous peak, while the last downward wave did not break the previous low. Thus, the trend has shifted back to bullish, but it is not stable—all waves are roughly equal in size. A temporary truce between Iran and the United States supported the bulls; however, three weeks later, it can be said that geopolitics is again moving toward escalation. Therefore, bullish attempts may be limited or may cease altogether.
On Tuesday, the news background had little impact on trader sentiment. Two reports were released in the US, but neither showed figures that warranted attention. The ISM Services PMI came in at 53.6, nearly identical to the market expectation of 53.7. JOLTS job openings totaled 6.866 million in March versus a forecast of 6.84 million—also nearly a match. As a result, traders had little to react to. The only potential driver remained the increasingly tense situation in the Middle East. For the second consecutive day, Iran launched missiles at the UAE, which could provoke a response from allies and push the conflict further toward escalation. According to US media, negotiations between Tehran and Washington are ongoing, but there is no clear or precise information about them. Traders are left to speculate about the actual state of negotiations and to carefully analyze daily statements from Donald Trump, trying to separate meaningful signals from noise. However, even the emerging escalation in the Middle East is no longer able to support the bears as strongly as it did one or two months ago. Geopolitics remains the key market theme, primarily because a renewed war could trigger higher energy prices and accelerate inflation.
On the 4-hour chart, the pair reversed in favor of the US dollar and began declining toward the 76.4% corrective level at 1.1617. A rebound from the 1.1778 level again suggests the possibility of some downward movement. In my view, the hourly chart is currently more informative due to the weakness of price movements. Bulls took control of the market about a month ago but are now searching for new growth drivers. No emerging divergences are observed on any indicators today.
Commitments of Traders (COT) report:
During the last reporting week, professional traders closed 316 long positions and opened 5,296 short positions. Over seven weeks in February and March, the bulls' total advantage disappeared, and over the past five weeks the situation has somewhat balanced out. The total number of long positions held by speculators now stands at 217,000, while short positions amount to 181,000. The gap is widening again in favor of the euro.
Overall, in the long term, major players continue to show strong interest in the euro. Of course, global events—of which there has been no shortage in recent years—continue to influence investor sentiment. At present, the market's focus remains on the Middle East, where the war has been paused but not ended. Thus, in the near term, the euro and dollar exchange rates will depend less on the monetary policies of the Federal Reserve and the European Central Bank or on economic data, and more on developments in Iran.
Economic calendar for the US and the Eurozone:
- US – ADP Employment Change (12:15 UTC).
On May 6, the economic calendar contains only one entry, which cannot be considered significant. The impact of the news background on market sentiment on Wednesday is expected to be weak.
EUR/USD forecast and trading advice:
Selling the pair is possible today if there is a rebound from the 1.1745 level on the hourly chart, with a target of 1.1666. Buying positions may be considered if the price consolidates above 1.1745, with a target of 1.1824.
