The EUR/USD pair traded in a consolidation mode on Friday and resumed its upward movement overnight into Monday after rebounding from the 61.8% Fibonacci retracement level at 1.1578 and consolidating above the 50.0% retracement level at 1.1630. Therefore, the euro may continue rising toward the next Fibonacci level at 38.2% – 1.1682. A consolidation below the 1.1630 level would favor the U.S. dollar and signal a resumption of the decline toward the 61.8% Fibonacci level at 1.1578.

The wave structure on the hourly chart currently remains relatively straightforward. The latest completed upward wave exceeded the previous peak by only a few points, while the latest downward wave, which has not yet been completed, broke below the previous low. Thus, the trend has shifted to bearish. The temporary ceasefire between Iran and the United States supported bulls for an entire month, but this was followed by a period of fading hopes for a lasting peace agreement. Bulls will only be able to launch a sustained advance if Iran and the United States sign an interim agreement.

There were very few notable events on Friday, and no significant economic reports were released. Donald Trump once again stated that negotiations with Iran had been successful, allowing expectations for the reopening of the Strait of Hormuz in the near future. On Sunday, the U.S. president confirmed that talks with Tehran were progressing successfully, that the key points had already been agreed upon, and that only minor details remained before the sides could sign an initial peace agreement that would allow negotiations to continue toward achieving stable and long-term peace.

Most traders remain skeptical about such statements, as there is still no concrete information regarding negotiations between Washington and Tehran concerning Iran's nuclear program. It should be recalled that Tehran does not intend to abandon uranium enrichment and is unwilling to transfer its stockpiles of enriched uranium outside the country. However, this is precisely what Washington is demanding. In addition, the White House believes that most of Iran's nuclear facilities should cease to exist. Trump seeks not only to ensure that Iran abandons nuclear fuel development in the short term, but also to eliminate future risks. Tehran opposes such a position, which means that a final agreement remains highly uncertain. Nevertheless, the market still has reasons for optimism, as the Strait of Hormuz could reopen as early as this week — at least if Donald Trump and Marco Rubio are to be believed.

On the 4-hour chart, the pair rebounded from the 76.4% Fibonacci retracement level at 1.1617, but failed to either continue its upward movement or begin a decline. Therefore, geopolitical developments continue to shift the direction of the pair on a daily basis, and at this stage I recommend focusing primarily on the hourly chart for analysis. No emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 9,249 Long positions and 15,936 Short positions. Over seven weeks in February and March, bulls lost their overwhelming advantage due to the conflict involving Iran, while over the past eight 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 233,000, compared with 199,000 Short positions. The gap is once again widening in favor of the euro.

Overall, from a long-term perspective, major market participants continue to show considerable interest in the euro. Naturally, various global developments — which have been plentiful in recent years — continue to influence investor sentiment. In particular, the market's attention remains focused on the Middle East, where the conflict has only been paused rather than resolved. Therefore, in the near term, movements in the euro and the dollar will depend less on Federal Reserve or ECB monetary policy and economic data, and more on developments in Iran.

Economic Calendar for the United States and the Eurozone:

The economic calendar for May 25 contains no significant entries. Therefore, macroeconomic data is unlikely to influence market sentiment on Monday.

EUR/USD Forecast and Trading Tips:

Short positions may be considered today if the pair closes below the 1.1630 level on the hourly chart, with a target at 1.1578. Long positions could be opened following a close above the 1.1630 level, with targets at 1.1682 and 1.1745. These long positions may still be held today.

Fibonacci retracement grids are plotted from 1.1409 to 1.1850 on the hourly chart and from 1.1474 to 1.2082 on the 4-hour chart.