The EUR/USD pair continued its decline on Friday and by the end of the day had moved below the 50.0% corrective level at 1.1630. As of Monday morning, the pair reversed in favor of the euro and consolidated above the 1.1630 level. Thus, the upward movement may continue for some time toward the 38.2% Fibonacci level at 1.1682. A renewed consolidation below 1.1630 would favor the US dollar and a resumption of the decline toward the 61.8% retracement level at 1.1578.

The wave structure on the hourly chart currently remains simple. The latest completed upward wave slightly broke the previous high, while the most recent downward wave broke the last low. Thus, the trend has shifted to bearish. A temporary ceasefire between Iran and the US supported bulls for a month, but after six weeks it can now be said that geopolitics is moving toward a prolonged conflict. As previously warned, bulls were unable to extend their momentum without a full ceasefire in the Middle East.

On Friday, the market continued buying the dollar, but with less enthusiasm than earlier in the week. The reason is simple: traders received no confirmation of their optimism regarding a potential deal between Iran and the US or the reopening of the Strait of Hormuz. As a result, bulls retreated sharply from the market. However, for bearish momentum to continue, the same condition is required—confirmation of a pessimistic scenario. In other words, the bullish theory of an imminent agreement has not been confirmed, but the bearish hypothesis of renewed war is also not confirmed yet. Therefore, I do not yet believe in further bearish attacks this week. The euro is currently taking a breather and may attempt to recover some losses. Friday's US industrial production report showed fairly positive results, allowing the dollar to strengthen slightly further. Over the weekend, Donald Trump again warned Iran of total destruction if a deal is not signed soon. However, whether Washington is ready for real escalation remains unknown. It has been clear for a month that Trump will continue making threats against Iran—but threatening and actually going to war are not the same. If Trump's threats are not followed through, bulls may regain the initiative.

On the 4-hour chart, the pair again rebounded from the 50.0% retracement level at 1.1778 and fell toward the 76.4% Fibonacci level at 1.1617. A rebound from this level would favor the euro and a move higher toward the 61.8% retracement level at 1.1706. A consolidation below 1.1617 would open the way for continued decline toward the 100.0% retracement level at 1.1474. No emerging divergences are currently observed on any indicator.

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 strong bullish advantage disappeared due to the war in Iran, and over the past seven weeks the situation has stabilized amid a pause in hostilities in the Middle East. The total number of long positions held by speculators is currently around 224,000, while short positions stand at 184,000. The gap is again increasing in favor of the euro.

Overall, in the long term, large market participants continue to show strong interest in the euro. Of course, global events—of which there has been no shortage in recent years—continue to influence investor sentiment. At present, market attention remains focused on the Middle East, where the war has only been paused, not ended. As a result, in the near term, EUR and USD exchange rates will depend less on Federal Reserve or ECB policy or economic data, and more on developments in Iran.

Economic Calendar for the US and EU:

The May 18 calendar contains no significant economic events. Therefore, the economic backdrop will not influence market sentiment on Monday.

EUR/USD Forecast and Trading Recommendations:

I previously recommended selling the pair on a rebound from 1.1786 and on consolidation below 1.1745 on the hourly chart, with a target of 1.1666. That target has been reached. New selling opportunities may be considered on a close below 1.1630, with targets at 1.1578 and 1.1514. Buying opportunities may be considered on 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 1.1474–1.2082 on the 4-hour chart.