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During Tuesday, the EUR/USD pair continued its upward movement after consolidating above the 100.0% corrective level at 1.1577. Therefore, the euro may continue to rise today toward the next Fibonacci level of 76.4% at 1.1696. The trend is beginning to shift toward bullish as geopolitical support for the dollar starts to weaken.
On the hourly chart, the wave structure remains clear. The last completed downward wave broke the low of the previous wave, while the new upward wave broke the previous high. Thus, the trend has now shifted to bullish. Actions by Donald Trump in the Middle East triggered large-scale military operations involving about a dozen countries, which allowed the dollar to strengthen as a safe-haven currency. However, the conflict is gradually easing, oil prices are stabilizing, and Donald Trump has stated that the objectives of the operation have been achieved.
On Tuesday, the news background was both supportive and unsupportive for the dollar. According to the weekly ADP report in the United States, the number of new jobs was 15,500, slightly above market expectations. Meanwhile, existing home sales totaled 4.09 million, which was below forecasts. Thus, these two reports supported sellers of the euro in the second half of the day. However, it should be noted that the significance of these data releases is relatively low. Much more important reports were published last week, and the dollar did not experience serious pressure at that time, although it might have been expected.
At that time, however, traders were focused mainly on geopolitical developments and on oil and gas prices. Now the conflict is beginning to ease. For example, Brent crude oil has already fallen to about $85, which is only about $15 higher than before the war in Iran began. Donald Trump has stated that the war in the Middle East may end soon, and traders appear to believe this statement. Demand for the dollar as a safe-haven asset has begun to decline as markets expect de-escalation of the conflict. In my view, Trump did not expect a prolonged military campaign in Iran, so it is in his interest to end the military operations as quickly as possible. If the U.S. president also manages to remove the blockade of the Strait of Hormuz, oil prices could fall further, allowing Trump to once again claim that he prevented a global crisis.
On the 4-hour chart, the pair reversed in favor of the euro and rose toward the 38.2% Fibonacci level at 1.1642. Consolidation above this level would allow further growth toward 1.1694 and 1.1748 within the descending trend channel. A rebound from the 1.1642 level would favor the U.S. dollar and lead to a renewed decline toward the 0.0% corrective level at 1.1471. No new emerging divergences are currently observed on any indicator.
During the latest reporting week, professional traders closed 287 long positions and opened 20,071 short positions. The sentiment of the Non-commercial group remains bullish due to Donald Trump and his policies, although in recent weeks there has been a reduction in long positions. The total number of long positions held by speculators is currently 294,000, while short contracts total 158,000. Bulls still hold nearly a two-to-one advantage.
Overall, over the long term, large market participants continue to reduce short positions and increase long positions. Global events—of which there has been no shortage in recent years—have varying effects on investors. At present, the market's attention is focused on the Middle East, where the war continues to expand and involve additional regions. As a result, in the near term the euro and the dollar will depend less on the Federal Reserve's monetary policy or economic data and more on developments in the conflict with Iran.
On March 11, the economic calendar contains two entries, one of which is considered important. The information background may therefore influence market sentiment on Wednesday. The market is not yet ready to actively sell the dollar, but sellers have stopped pressing their advantage and buyers have begun to apply gradual upward pressure.
Selling positions were possible when the pair rebounded from 1.1830 on the hourly chart, with targets at 1.1770, 1.1696, and 1.1577. All targets have been reached. New short positions may be considered if the price closes below 1.1577, with a target at 1.1440, although the bearish impulse appears to have weakened. Buy positions could be opened after consolidation above 1.1577, with a target at 1.1696. These positions may still be held today.
Fibonacci levels are drawn from 1.1805 to 1.1578 on the hourly chart and from 1.1919 to 1.1471 on the 4-hour chart.
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