EUR/USD Analysis and Forecast – June 9th: The Market Shifts Its Focus to the ECB

On Monday, EUR/USD rebounded twice from the 76.4% Fibonacci retracement level at 1.1514, reversed in favor of the euro, and began moving higher toward the 61.8% retracement level at 1.1578. A rebound from 1.1578 would favor the U.S. dollar and the resumption of the decline toward 1.1514. Consolidation above 1.1578 would increase the likelihood of further growth toward the next Fibonacci level of 50.0% at 1.1630.

The wave structure on the hourly chart remains straightforward. The latest completed upward wave broke above the previous peak, while the latest downward wave broke below the previous low. Therefore, the trend has once again shifted to bearish. Bulls may launch a new offensive only if Iran and the United States sign an interim agreement, stop violating the ceasefire terms, and the Strait of Hormuz remains open. Without these conditions, further appreciation of the euro will be extremely difficult.

No important economic data were released on Monday, and traders began shifting their focus from the U.S. economy and geopolitics to the ECB meeting and the upcoming U.S. inflation report. The inflation report is currently not the most important factor for traders, even if the May reading exceeds the April figure. Inflation in the United States is accelerating, and that is a fact. However, the Federal Reserve has so far not responded to this acceleration and is waiting for the conflict in the Middle East to be resolved. Therefore, the U.S. Consumer Price Index could jump to 4.2% in May, but that would not necessarily mean that the Fed is preparing to tighten monetary policy in the near future. For this reason, I do not consider the inflation report the key event of the week.

The ECB meeting is a different matter. It could mark the beginning of a tightening cycle among the G7 central banks. Regardless of how much the market has ignored non-geopolitical developments in recent months, it is unlikely to overlook an interest rate increase as a response to the geopolitical conflict itself. Therefore, bulls may be able to conduct moderate attacks this week, while Donald Trump stated again this morning that the conflict with Iran could be resolved within the next two weeks.

On the 4-hour chart, the pair rebounded from the 38.2% Fibonacci retracement level at 1.1667 and resumed its decline within the descending trend channel. Consolidation below the 23.6% Fibonacci level at 1.1569 supports expectations for a continuation of the decline toward the next retracement level of 0.0% at 1.1411. I will begin to expect a bullish trend only after prices close above the channel. No emerging divergences are currently observed on any indicator.

During the latest reporting week, professional traders opened 12,387 long positions and closed 7,053 short positions. Over the seven weeks of February and March, the bulls' overwhelming advantage disappeared due to the war in Iran, while during the past ten weeks the situation has stabilized amid the suspension of hostilities in the Middle East. The total number of long positions held by speculators currently stands at 235,000, compared with 186,000 short positions. The gap is once again widening in favor of the bulls.

Overall, large market participants continue to view the euro favorably over the long term. Naturally, global developments of various kinds—of which there has been no shortage in recent years—continue to influence investor sentiment. In particular, the market's attention remains focused on the Middle East, where the conflict has merely been paused rather than resolved. Therefore, in the near term, the direction of the euro and the dollar will depend less on Federal Reserve or ECB monetary policy and economic data, and more on developments in Iran.

Germany

United States

The economic calendar for June 9 contains only two secondary events. Therefore, the impact of the economic backdrop on market sentiment on Tuesday is expected to be extremely limited.

Short positions may be considered today if the pair closes below 1.1514 on the hourly chart, with a target at 1.1409. Alternatively, selling opportunities may arise on a rebound from 1.1578, targeting 1.1514. Long positions could be initiated on a rebound from 1.1514, with targets at 1.1578 and 1.1630. These positions may still be held today.

Fibonacci grids are drawn from 1.1409 to 1.1850 on the hourly chart and from 1.2081 to 1.1411 on the 4-hour chart.