The EUR/USD pair continues its upward movement on expectations of a ceasefire between Iran and the United States, as well as a halt in hostilities in the Middle East. Over the past two days, trading activity—particularly among bulls—has noticeably declined, which is not surprising, as they cannot push the market higher continuously. Pauses are necessary. In addition, it is currently unclear when the next round of negotiations between Washington and Tehran will take place, despite widespread media discussion. Donald Trump stated that the war in the Middle East is nearing its end, but the market needs facts, not speculation. It needs a unified position on the key issues between Iran and the US.
Last week, a reaction was observed at bullish imbalance 12, which triggered the current bullish advance. Thus, traders had the opportunity to open long positions, which are now showing strong profits. The geopolitical backdrop has become more favorable compared to two weeks ago, which likely explains the sharp improvement in bullish sentiment. However, in my view, several factors played a role. First, the market could not continue fleeing risk indefinitely by buying dollars. Risk is not a permanent condition, and capital can be reallocated into safe assets fairly quickly. Second, there was a technical buy signal. Third, Donald Trump softened his rhetoric regarding the Middle East conflict. Previously, he issued threats toward Iran, but now he is speaking primarily about negotiations and agreements.
All of the US dollar's growth over the past one and a half to two months has been driven solely by geopolitics. As soon as the US and Iran agreed to a two-week ceasefire, bears immediately retreated and bulls moved aggressively into the market. At present, the ceasefire remains fragile but intact, despite the failure of talks in Islamabad last Saturday. I have repeatedly stated that I do not believe the bullish trend has ended, despite the break of key structural lows. The price action of the past two months could evolve into a bearish trend if geopolitics deteriorates further—but how much worse can it realistically get? Most of the worst-case scenarios have already occurred. Markets often price in the most pessimistic outlook in advance, attempting to anticipate the worst. Therefore, it is possible that traders have already fully priced in the geopolitical conflict in the Middle East.
The technical picture has now become clearer. First, price showed no reaction to imbalance 11, meaning no sell signal was formed. Second, price reacted to imbalance 12, forming a bullish signal within a bullish trend. Third, a new bullish imbalance 13 has formed, which represents a zone of interest for future long positions and serves as a support area for the euro.
There was virtually no news flow on Thursday. The Eurozone Consumer Price Index rose to 2.6% in March, slightly above expectations, but traders had already anticipated strong inflation growth. The exact increase in inflation during the first month of the Middle East conflict is not particularly important. What matters now are the ECB's next steps, and Christine Lagarde did not clarify the outlook for monetary policy earlier this week.
There remain many reasons for bulls to stay active in 2026, and even the outbreak of war in the Middle East has not reduced them. Structurally and globally, Trump's policies—which contributed to a significant weakening of the dollar last year—have not changed. In the short term, the US dollar may still rise due to risk aversion, but this would require ongoing escalation in the Middle East, which is not sustainable. Just one week of pause allowed the euro to recover nearly 300 points. Meanwhile, the dollar lacks other strong supporting factors. I still do not believe in a sustained bearish trend for EUR/USD. The dollar has received temporary support, but what will drive bears in the long term?
News Calendar for the US and Eurozone:
On April 17, the economic calendar contains no significant events. The news background is unlikely to influence market sentiment on Friday.
EUR/USD Forecast and Trading Advice:
In my view, the pair remains in the formation stage of a bullish trend. The news backdrop shifted sharply two months ago, but the overall trend cannot yet be considered canceled or complete. Therefore, bulls may continue their advance in the near term—unless geopolitics suddenly turns toward renewed escalation.
Bulls previously had opportunities to open long positions based on the signal from imbalance 12, targeting around the 1.1670 level. This target has long been reached, and the upward movement may continue toward this year's highs. A new imbalance 13 has also formed, which may generate another bullish signal in the future. For uninterrupted growth of the euro, the Middle East conflict would need to move toward a lasting peace—something that is not currently evident. However, bears are not gaining additional reasons to attack either. In the near term, I would rely primarily on technical analysis.
