The EUR/USD pair continues a weak upward movement amid complete geopolitical uncertainty. Over the past few days, the pair has changed direction several times, and traders are ignoring chart patterns. On Monday, Donald Trump stated that the war in the Middle East would end soon, which immediately triggered a retreat by sellers. However, just half an hour later, Iran announced that no negotiations with the U.S. were underway and that the Strait of Hormuz would remain closed. Markets believed Trump; the dollar tends to weaken on de-escalation news, and buyers pushed the pair higher. However, further growth will only be possible if Trump's words are supported by concrete developments.
All of the U.S. dollar's growth over the past 4–5 weeks has been driven by geopolitics. That is why I have repeatedly said that I do not believe the bullish trend has ended, despite the break of key trend-forming lows. At present, everything is moving toward the invalidation of imbalance 12, and the invalidation of a bearish pattern is the first sign of a shift in trader sentiment. Of course, imbalance 11 remains, also bearish, and the price may react to it. Moreover, the war in the Middle East has not ended. Monday's trading showed that buyers can push higher, but they need more than just Trump's statements.
I will only believe in a continuation of the decline if geopolitics continues to provide strong support to sellers. As mentioned earlier, this would require not just a difficult situation in the Middle East, but a worsening one. What would that mean? Oil prices would need to continue rising, more countries would need to become involved in the conflict, and the economies of developed countries would have to suffer for an extended period. The conflict itself would need to last for many months. Previously, I noted that I do not see strong prerequisites for such a scenario, but there is very little positive news coming from the Middle East. The situation could escalate again at any moment.
There are currently no new patterns for opening positions. In the near future, imbalance 11 may be tested, and if the price reacts to this pattern, the downward movement may resume with targets below 1.1400. However, this requires geopolitical support. If the market shifts its focus back to standard economic factors, then last week the European Central Bank and the Bank of England created a basis for euro and pound growth by signaling readiness to tighten monetary policy. For now, however, traders remain more focused on the Strait of Hormuz and Iran.
The chart picture still indicates bullish dominance. The bullish trend remains intact, but at the moment buyers are in a difficult position due to the sharply changing flow of information. To open new long positions, new bullish patterns are needed, or at least a liquidity sweep from the last two bearish swings. A liquidity sweep has occurred, but it is not a tradable pattern on its own.
Tuesday's news background was mixed for the euro, as manufacturing PMI indices in Germany and the Eurozone exceeded expectations, while services PMI indices fell below forecasts. As a result, neither buyers nor sellers received clear support.
There are still many reasons for buyers to push higher, and even the outbreak of the Middle East conflict has not reduced them. Structurally and globally, Trump's policies—which led to a significant decline in the dollar last year—have not changed. In the near term, the U.S. currency may strengthen amid a flight to safety, but this factor cannot support it indefinitely. There are no other strong supporting factors for the dollar.
I still do not believe in a bearish trend. The dollar has received temporary support, but it is unclear how long this will last. However, the bullish trend has been disrupted, and this must be acknowledged. There is still a chance for a liquidity sweep and trend resumption, but geopolitics may once again weigh heavily on EUR/USD.
Economic Calendar for the U.S. and the Eurozone
- Eurozone – Speech by ECB President Christine Lagarde (10:45 UTC)
- Germany – Business Climate Index (11:00 UTC)
On March 25, the economic calendar contains only two entries, neither of which is particularly significant. The impact of the news flow on market sentiment on Wednesday may be limited.
EUR/USD Forecast and Trading Advice
In my view, the pair remains in the process of forming a bullish trend. The information background shifted sharply about three weeks ago, but the trend cannot yet be considered fully canceled or completed. Therefore, in the near term, traders need new patterns and signals to form short-term forecasts.
In the near future, sellers may receive a signal from imbalance 11, while the invalidation of imbalance 12 is also a type of signal. Buyers, meanwhile, can only rely on the formation of new bullish patterns and further buy signals.
