On Tuesday, the EUR/USD pair reversed in favor of the U.S. dollar and consolidated below the 50.0% Fibonacci correction level at 1.1630. Thus, the decline in quotes may continue toward the next Fibonacci level of 61.8% at 1.1578. A rebound from this level would favor the euro and some growth toward the 1.1630 level. Consolidation below 1.1578 would increase the likelihood of further decline toward the next corrective level of 76.4% at 1.1514.

The wave structure on the hourly chart currently remains straightforward. The latest completed upward wave exceeded the previous peak by only a few points, while the latest downward wave (which is still unfinished) 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, six weeks later, it can be said that geopolitics is moving toward the continuation of the conflict. As I previously warned, the bulls were unable to develop their momentum without a full ceasefire in the Middle East.

On Tuesday, the bears resumed their attacks amid total disbelief in a positive outcome from the new negotiations with Iran, which now involve other Middle Eastern countries allied with the United States. On Monday, it became known that Donald Trump, at the request of Gulf state leaders, agreed to postpone new strikes on Iran. However, by Tuesday, reports emerged that a meeting had been held at the White House with all senior officials connected to the military operation in the Middle East. During the meeting, Donald Trump was presented with all possible military action scenarios. Therefore, the war could resume by the end of the week.

Trump himself stated on Monday that due to "very important negotiations," he postponed his decision on new strikes against Iran for two or three days. If the negotiations are successful, an agreement will be reached, and new attacks on Tehran will not be necessary. However, as of Wednesday morning, we are receiving more and more signs that the "two- or three-day delay" is indeed only a delay, not a complete abandonment of further military action.

On the 4-hour chart, the pair rebounded from the 76.4% corrective level at 1.1617 but failed to continue its upward movement and reversed in favor of the U.S. currency, consolidating below the 1.1617 level. Thus, the decline may now continue toward the 100.0% corrective level at 1.1474. Consolidation above 1.1617 would allow expectations for a renewed rise in the euro toward the 1.1706 level. No emerging divergences are currently observed 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' overwhelming advantage disappeared because of the war in Iran, while over the past seven weeks the situation has stabilized amid the suspension of hostilities in the Middle East.

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

Overall, in the long term, large market participants continue to view the euro with considerable interest. Naturally, various global events — which have been abundant in recent years — continue to influence investor sentiment. In particular, the market's attention remains focused on the Middle East, where the war has merely been paused, not ended. Thus, 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 – Producer Price Index (06:00 UTC)
• Eurozone – Consumer Price Index (09:00 UTC)
• United States – FOMC Minutes (18:00 UTC)

The May 20 economic calendar contains three secondary events. The influence of the economic background on market sentiment on Wednesday is once again expected to be absent.

EUR/USD Forecast and Trading Tips

I previously recommended selling the pair after consolidation below the 1.1630 level on the hourly chart, targeting 1.1578. Today, these trades may still be kept open with targets at 1.1578 and 1.1514.

Buy positions may be opened after consolidation above the 1.1630 level with targets at 1.1682 and 1.1745. Alternatively, buys may be considered after a rebound from the 1.1578 level.

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