The EUR/USD pair consolidated above the 61.8% Fibonacci retracement level at 1.1578 on Monday but returned to this level by Tuesday morning. A rebound from 1.1578 today would once again favor the euro and support a renewed advance toward the 50.0% retracement level at 1.1630. Consolidation below 1.1578 would allow traders to expect a continuation of the decline toward the 76.4% Fibonacci level at 1.1514.

The wave structure on the hourly chart remains straightforward at this stage. The most recently completed downward wave failed to break the previous low, while the new upward wave exceeded the previous peak. Therefore, the trend has shifted to bullish. Geopolitical developments improved significantly over the weekend, as Donald Trump announced an agreement with Iran, and both Iran and Pakistan confirmed this information. As a result, the conflict may be resolved in the near future, giving bulls an opportunity to continue their advance.

There were few important economic events worldwide on Monday. In the European Union, April industrial production data was released but failed to show a strong result. In addition, European Central Bank President Christine Lagarde delivered a speech. The ECB President stated that inflation in the euro area is becoming increasingly visible across nearly all sectors of the economy and is no longer an isolated issue confined to the energy market. According to Lagarde, the second wave of the inflationary spiral has begun, reflected in rising prices for goods and services. First, fuel and energy prices increase; then manufacturers raise prices; afterward, prices rise in retail networks and the services sector. Europe is currently experiencing this final stage. Christine Lagarde stopped short of explicitly calling for monetary policy tightening in July, but such a decision appears increasingly justified, even if the Strait of Hormuz reopens in the near future and energy prices stabilize. Therefore, the ECB may raise interest rates again at its July meeting, although this has so far provided little support for the euro.

On the 4-hour chart, the pair reversed in favor of the euro and began advancing within a downward trend channel toward its upper boundary. A rebound from the 38.2% Fibonacci retracement level at 1.1667 would keep the pair inside the downward channel. Consolidation above the channel would allow traders to expect the development of a full-fledged bullish trend, with initial targets at 1.1746 and 1.1824. No emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

During the latest reporting week, institutional traders closed 15,878 long positions and opened 19,056 short positions. Over the seven weeks of February and March, the bulls' overwhelming advantage disappeared due to the war in Iran. Over the past eleven weeks, the situation has balanced out amid the suspension of hostilities in the Middle East, and bulls have once again regained dominance. The total number of long positions held by speculators now stands at 219,000, compared with 205,000 short positions.

Overall, from a long-term perspective, major market participants continue to view the euro favorably. Naturally, various global events—which have been abundant in recent years—continue to influence investor sentiment. In particular, market attention remains focused on the Middle East, where the conflict has merely been paused rather than resolved. Therefore, in the near term, movements in the euro and the U.S. dollar will depend less on the monetary policies of the Federal Reserve and the ECB, or on economic data, and more on developments in Iran.

News Calendar for the United States and the European Union:

• Germany – ZEW Economic Sentiment Index (09:00 UTC).
• U.S. – Building Permits (12:30 UTC).
• U.S. – Housing Starts (12:30 UTC).

The economic calendar for June 16 contains three events, none of which are considered highly significant. The impact of the economic backdrop on market sentiment on Tuesday is expected to be minimal or nonexistent.

EUR/USD Forecast and Trading Recommendations:

Short positions may be considered if the pair closes below 1.1578 on the hourly chart, with a target at 1.1514. Long positions may be opened on a rebound from 1.1578, with a target at 1.1630.

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