The EUR/USD pair declined for six days, but the bears' advance may now be coming to an end. Overall, it can be said with confidence that the bears truly attacked only last Friday, when FOMC President Kevin Warsh first spoke, followed by a revision to the annual Nonfarm Payrolls data. Neither of these events was unequivocally bearish; nevertheless, they can be interpreted as such if one chooses to. As I wrote earlier, the Nonfarm Payrolls report could have been much worse than it ultimately was, while Warsh's speech could once again be interpreted as having "hawkish" undertones. However, a straightforward assessment of the available data suggests that there was no reason for the dollar to rise even on Friday. The Nonfarm Payrolls report showed a negative reading, while Kevin Warsh merely spoke about high inflation and did not promise to raise the interest rate or take any specific measures. The euro's price declined to the base of imbalance 21, and the decline has so far ended there. From here, everything will depend mainly on the U.S. labor market and unemployment data.
Overall, in my view, the fundamental backdrop continues to fully support the bulls. First, any chart clearly shows that the euro began its rise from relatively low levels, compared with the average price over the past year. This means that it still has upward potential. Second, the market continues to doubt that the FOMC will tighten monetary policy in September, regardless of what statements Warsh makes. Third, U.S. economic data have recently been nothing but disappointing. Fourth, geopolitical developments no longer support the bears or the dollar. Fifth, the ECB may implement another monetary policy tightening this autumn. Sixth, the U.S. Treasury has decided to increase its purchases of long-term bonds, reducing demand for the dollar. Seventh, a new trade war between the United States and Canada, and between the United States and China, could begin in the near future. Eighth, the U.S. labor market is contracting, which could put an end to Warsh's "hawkish initiatives." Thus, I currently see not a single reason for a "bearish" advance.
The latest U.S. labor market data showed weak readings, inflation is slowing, and GDP growth is losing momentum. These three factors make me doubt an FOMC rate hike not only in September but also by the end of the year. In my view, the bears' only opportunity at present lies in a new escalation in the Middle East. However, Donald Trump is not inclined toward military escalation. He now wants to put economic pressure on Iran instead.
The current technical picture points to the continuation of the "bullish" momentum. The price has completely filled the latest "bullish" imbalance 21 and may even touch the previous "bullish" imbalance 20. The combined reaction to these two patterns could bring the bulls back into the market, and the upward move could resume. If one or both patterns are invalidated, the bears will be able to launch their own offensive, but even in that case, they will need fundamental support. Where would they get it?
The economic backdrop on Tuesday allowed the bulls to launch a new attack. Inflation in the European Union rose to 3.3%, as traders had expected. Perhaps because market expectations matched the actual figure, we did not see the euro rise, but the euro certainly did not deserve to fall. So far, traders have been making less-than-clear-cut decisions this week.
There remain a huge number of reasons for the bulls to attack in 2026, and even the outbreak of war in the Middle East has not reduced their number. Structurally and globally, Trump's policies, which led to a significant decline in the dollar last year, have not changed. At present, I see no significant factors supporting the U.S. currency, despite the FOMC's formally "hawkish" stance. Geopolitical developments, which supported demand for the U.S. currency during most of the first half of 2026, no longer do so. The conflict in the Middle East remains unresolved, but there have been no new hostilities from either Iran or the United States.
Economic Calendar for the United States and the European Union:
United States — ADP Employment Change (12:00–15:00 UTC).On September 2, the economic calendar contains only one item, which I do not consider important. The impact of the economic backdrop on market sentiment on Wednesday will be extremely weak or nonexistent.
EUR/USD Forecast and Trading Advice:
In my view, the pair remains in the process of forming a "bullish" trend that has paused for an entire year. The fundamental backdrop changed sharply in favor of the bears six months ago, but the trend itself cannot be considered canceled or completed. In the long term, I would say that the pair is in a range. However, a range does not cancel the broader trend. Thus, the bulls may well continue their advance after two liquidity sweeps of clearly defined lows. At present, bullish traders have an excellent support zone in the form of imbalance 21. A new buy signal may form within this imbalance or imbalance 20. I consider 1.1797 and 1.1850 to be the upward targets for the euro.