EUR/USD – Smart Money Analysis: The Euro Starts the Week on a Positive Note

The EUR/USD pair has lost a total of 280 points over the past two weeks. What triggered such an aggressive bearish advance, which ultimately came to an end on Friday? It is worth remembering that there is currently no immediate threat of renewed war in the Middle East, although Donald Trump continues to warn of possible new strikes against Iran if a nuclear agreement is not reached within 60 days. The Fed did adopt a more hawkish tone at its June meeting, but the US dollar continued to rally for an entire week, which I consider either an excessive market reaction or a move unrelated to the FOMC meeting. Likewise, the ECB's latest policy meeting was far from dovish, making it difficult to justify a week-long decline in the euro. Negotiations between Tehran and Washington are ongoing, with both sides having two months to resolve the nuclear dispute, and neither appears eager to resume hostilities. Even the temporary ceasefire signed last week should have reduced risk aversion in the market. Therefore, in my opinion, there were simply no solid reasons for such a strong rally in the US dollar. Nevertheless, markets sometimes produce moves that are difficult to explain. That is exactly what we have witnessed over the past two weeks. And the decline may not yet be over if price reacts to bearish imbalance 18.

Geopolitics has now clearly taken a back seat. Tehran and Washington have signed a memorandum of understanding, extended the ceasefire by 60 days, and resumed work toward fully reopening the Strait of Hormuz and negotiating a nuclear agreement. Yet we did not see the widely anticipated decline in the US dollar as geopolitical tensions eased. Nor did we see the euro strengthen despite the ECB's tighter monetary policy stance. Quite the opposite—the bears dominated the market throughout the week regardless of the fundamental and geopolitical backdrop. Under these circumstances, traders should either wait for the bearish move to run its course or for fresh sell signals to emerge.

The current technical picture still points to the continuation of the bearish impulse that began on April 17. Bearish imbalance 17 was never fully worked off and did not generate a sell signal. Last week, bearish imbalance 18 formed and could trigger a market reaction today or tomorrow. Only if imbalance 18 is invalidated will the bulls be in a position to launch a counteroffensive. In that case, I would once again expect the euro to resume its advance, which, in my opinion, would be a far more logical development under current conditions. I would also expect bullish chart patterns to emerge, as I still believe the broader bullish trend remains intact.

There was no meaningful economic data on Monday, and traders ignored the weekend headlines regarding renewed exchanges between Iran and the United States, as well as today's reports that the two countries had returned to the negotiating table and agreed once again to a ceasefire in the Strait of Hormuz. In my view, the bulls' willingness to buy the euro on Monday is an encouraging sign. However, this week features several major economic reports, meaning market sentiment could easily shift back in favor of the bears.

The bulls still have numerous reasons to remain active in 2026, and the conflict in the Middle East has done little to change that. Structurally and fundamentally, Trump's policies—which contributed to the sharp decline in the US dollar last year—remain largely unchanged. At present, I see few convincing long-term support factors for the dollar despite the FOMC's hawkish tone. EUR/USD is approaching a cluster of important lows and swing points where liquidity could be swept, potentially signaling the end of the current bearish impulse.

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The June 30 economic calendar contains four scheduled releases. The impact of today's economic data on market sentiment is likely to be moderate.

In my view, the pair remains in the process of developing a broader bullish trend. Although the fundamental backdrop shifted sharply in favor of the bears four months ago, the overall trend cannot yet be considered invalidated or complete. Therefore, the bulls could begin a new advance after liquidity is swept below the most obvious 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 chart patterns.

At present, traders have two bearish imbalances available as potential areas for initiating short positions. However, I would draw attention to the proximity of four significant swing lows, where liquidity sweeps could occur, as well as the rather questionable fundamental backdrop behind the recent strength of the US dollar. Consequently, I continue to expect a bullish recovery, but I would first like to see technical confirmation of that scenario—or, alternatively, new sell signals if the market continues lower.