The EUR/ USD pair rose for the fifth straight day on expectations of a ceasefire agreement between Iran and the United States—expectations that ultimately did not materialize. I don't want to sound overly categorical, but the chances of achieving a lasting peace after just one official meeting between the US and Iran were extremely low from the outset. Nevertheless, traders believed in a positive outcome, and the chart pattern finally supported the bulls, which drove the euro higher over the week.
A reaction was received from bullish imbalance 12, after which the bullish advance began. Of course, if geopolitics had not turned against the bears, this rally might not have happened. Still, the pattern itself is not meaningless. Traders had the opportunity to open long positions, which are currently in good profit. However, the geopolitical backdrop changed sharply over the weekend, and now it will be more difficult for bulls to continue their advance. There are no bearish signals at the moment; moreover, a new bullish pattern has formed—but I would now approach any EUR/USD buying with caution.
All of the US dollar's strength over the past one and a half to two months has been driven solely by geopolitics. As soon as the US and Iran agreed to a two-week ceasefire, bears immediately retreated, and bulls rushed in. At present, the truce remains fragile but is holding despite the failure of negotiations in Islamabad.
I have repeatedly said that I do not believe in the end of the bullish trend, despite the breakdown of key trend-forming lows. The price movement over the past two months could still evolve into a bearish trend if geopolitics worsen further—but how much worse can it get? Much of the worst-case scenario has already occurred. Markets often price in the most pessimistic outlook in advance, trying to anticipate the worst possible developments.
Thus, it is possible that traders have already priced in the Middle East conflict. At the same time, the lack of de-escalation may create obstacles for further upward movement.
The chart picture is currently mixed. On one hand, the price may soon react to imbalance 11 and resume declining, supported by recent geopolitical developments. On the other hand, the reaction to imbalance 12 created a bullish signal within a bullish trend. Additionally, a new bullish imbalance has formed, which acts as both a support zone and a potential area of interest for future buy trades, and a new bullish signal could form as early as this week.
The news background on Monday was relatively weak, as there were almost no economic reports. However, Donald Trump has begun efforts to block Iranian tankers in the Strait of Hormuz, aiming to prevent them from delivering oil to buyers. Oil prices have surged again, reaching $100 per barrel—and it's fortunate they haven't risen higher. Overall, the market is watching developments closely and is reluctant to make hasty decisions.
There are still many reasons for bulls to remain active, and even the outbreak of war in the Middle East has not reduced them. Structurally and globally, Trump's policies—which contributed to a sharp decline in the dollar last year—have not changed.
In the short term, the US dollar may strengthen due to risk aversion, but this support is not sustainable without continued escalation in the Middle East. There are no other strong supporting factors for the dollar. I still do not believe in a long-term bearish trend for EUR/USD. The dollar has received temporary support, but what will drive sustained bearish pressure in the long run?
Economic Calendar for the US and the Eurozone:
- US – ADP Employment Change (12:15 UTC)
- US – Producer Price Index (12:30 UTC)
On April 14, the economic calendar contains two secondary entries. Their impact on market sentiment on Tuesday is expected to be minimal or negligible.
EUR/USD Forecast and Trading Advice:
In my view, the pair remains in the process of forming a bullish trend. The information backdrop shifted sharply two months ago, but the overall trend cannot yet be considered canceled or completed. Therefore, bulls may continue their advance in the near term—provided geopolitics allow it.
Bears may soon receive a signal from imbalance 11. Bulls previously had the opportunity to open long positions based on the signal from imbalance 12, targeting around 1.1670. That target has already been reached, but the upward movement may continue toward yearly highs.
A new imbalance (13) has also formed, which could generate another bullish signal this week. For the euro to rise without obstacles, the Middle East conflict would need to move toward lasting peace—which is not currently the case. However, bears are also not gaining additional reasons to attack. For now, I would rely primarily on technical (chart-based) analysis.
