On Wednesday, the EUR/USD pair reversed in favor of the euro and climbed toward the 50.0% Fibonacci corrective level at 1.1630. A rebound from this level would favor the U.S. dollar and resume the decline toward the 61.8% corrective level at 1.1578. A consolidation above 1.1630 would support continued growth toward the next Fibonacci level of 38.2% at 1.1682.

The wave structure on the hourly chart currently remains straightforward. The latest completed upward wave exceeded the previous peak by only a few pips, while the latest downward wave — which is still incomplete — broke below the previous low. Thus, the trend has shifted to bearish. The temporary ceasefire between Iran and the United States supported the bulls for a month, but now, after six weeks, it can be said that geopolitics is moving toward preserving the conflict. As I previously warned, the bulls were unable to maintain their momentum without a full ceasefire in the Middle East.

On Wednesday, neither bulls nor bears were in a hurry to act. Trading activity remained weak throughout the day, but in the evening Donald Trump decided to wake up the market by stating that negotiations with Iran were progressing successfully and that most of Washington's demands could be met. Following these comments, the bulls regained confidence, but their momentum quickly faded.

Unfortunately, confidence in Donald Trump's statements remains low, as the president changes his rhetoric several times a day. As a result, traders are reluctant to draw conclusions. Just last night, the U.S. leader stated that Iran had only a few days left to accept Washington's terms and sign an agreement, clearly hinting that new missile strikes could follow afterward.

However, I doubt the likelihood of renewed strikes against Iran just as much as I doubt the prospect of a near-term peace agreement. And apparently I am not the only one, as the market on Thursday has also shown little urgency in opening positions. In my view, neither a deal with Iran nor new strikes against Iran are likely in the near future. Trump could have resumed military aggression many times over the past month and a half, but he has not done so.

On the 4-hour chart, the pair rebounded from the 76.4% corrective level at 1.1617 but failed to continue either upward growth or begin a new decline. Thus, geopolitics continues to change the direction of the pair's movement on a daily basis, which is why I currently recommend focusing primarily on the hourly chart for analysis. No emerging divergences are currently visible on any indicators.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 6,528 long positions and closed 1,470 short positions. Over seven weeks in February and March, the bulls' total advantage disappeared due to the war in Iran, while over the last seven weeks the situation has stabilized amid the pause in hostilities in the Middle East.

The total number of long positions held by speculators now stands at 224,000, compared to 184,000 short positions. The gap is once again widening in favor of the euro.

Overall, in the long term, large players continue to view the euro with considerable interest. Naturally, global events of various kinds — which have been abundant in recent years — continue to influence investor sentiment. At the moment, market attention remains focused on the Middle East, where the war has merely been paused rather than ended. Therefore, in the near future, the euro and dollar exchange rates will depend not on the monetary policies of the Federal Reserve or the ECB, nor on economic data, but on developments in Iran.

Economic Calendar for the U.S. and the Eurozone:

Germany

• Manufacturing PMI (07:30 UTC)
• Services PMI (07:30 UTC)

Eurozone

• Manufacturing PMI (08:00 UTC)
• Services PMI (08:00 UTC)

United States

• Building Permits (12:30 UTC)
• Housing Starts (12:30 UTC)
• Initial Jobless Claims (12:30 UTC)
• Manufacturing PMI (13:45 UTC)
• Services PMI (13:45 UTC)

On May 21, the economic calendar includes nine scheduled events, with the German and Eurozone PMI reports attracting the most attention. Despite the large number of releases, the impact of the economic backdrop on market sentiment on Thursday may remain limited.

EUR/USD Forecast and Trading Recommendations:

I recommend considering short positions on Thursday after a rebound from the 1.1630 level on the hourly chart, targeting 1.1578. Long positions may be opened after a close above 1.1630, with targets at 1.1682 and 1.1745.

Fibonacci grids are drawn from 1.1409–1.1850 on the hourly chart and from 1.1474–1.2082 on the 4-hour chart.