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The EUR/USD pair remains within a local bearish impulse, although the bulls have gained some opportunities over the past two weeks. However, the euro's advance during this period has been so modest that it is barely visible on the charts. Even so, the bulls have mounted a limited offensive, and the euro's near-term outlook—at least for this week—will depend on geopolitical developments, inflation data, and Kevin Warsh's stance. These three factors are likely to determine market sentiment throughout the week.
Tomorrow, the United States will release its June Consumer Price Index (CPI) report, while Kevin Warsh will deliver the first of his two scheduled appearances before Congress. In my view, Warsh's rhetoric is unlikely to change, and he will continue to emphasize the need to bring inflation lower. However, that does not necessarily mean the Federal Reserve will tighten monetary policy as early as this month.
It is also worth recalling that the latest U.S. labor market data suggests inflation is not the only issue investors should be monitoring. Job creation has once again remained relatively weak. Over the past three months, employment growth has fallen short of market expectations by approximately 100,000 jobs. As a result, the slowdown in the U.S. labor market could force the FOMC to weigh any decision on further monetary tightening much more carefully.
Over the past week and a half, the euro has managed only a modest recovery. That was enough to invalidate imbalance 18, allowing traders to target imbalance 17. As long as imbalance 17 remains valid, the bearish impulse remains intact. However, during the past two weeks, the bulls have been unable to push the market even 100 points higher. This week, stronger-than-expected U.S. inflation could bring the bears back into the market.
Geopolitical developments have moved into the background as attention has shifted toward the Federal Reserve. Last week, Tehran and Washington once again violated the terms of both the ceasefire and the June 17 agreement, but traders were hardly surprised. Donald Trump signed an executive order revoking Iran's authorization to export oil, while Iran once again closed the Strait of Hormuz and has been attacking vessels attempting to pass through it. The market did not react when the conflict eased, so it should not necessarily react now that tensions have increased again.
We never saw the expected dollar decline following the reduction in geopolitical tensions, nor did we see euro strength after the European Central Bank tightened monetary policy. The bears remain in control despite the broader macroeconomic and geopolitical backdrop. Renewed geopolitical tensions now provide formal justification for fresh bearish attacks, although in my view the market is reacting for the third time to developments that have not yet fully materialized.
The current technical picture continues to point to the bearish impulse that began on April 17. Bearish imbalance 17 remains unfilled, while imbalance 18 was invalidated following weak U.S. labor market data. No bullish patterns have formed, and none are likely to appear in the coming days given the market's sideways price action. Consequently, the bulls may continue their corrective move toward imbalance 17, but there is currently no attractive technical setup for trading that advance.
It is also worth noting that price has swept the liquidity below the August 1 low from last year (the red line on the chart). At the moment, this remains the bulls' only meaningful technical signal and source of optimism.
There was virtually no economic data released on Monday, with no significant reports throughout the day. For now, all that remains is to wait.
The bulls still have numerous long-term arguments in their favor in 2026, and even the renewed Middle East conflict has not fundamentally changed that outlook. Structurally and fundamentally, Donald Trump's policies—which contributed to the sharp decline in the U.S. dollar last year—remain unchanged. At present, I do not see any major long-term factors supporting the U.S. currency despite the FOMC's hawkish stance.
Meanwhile, EUR/USD is approaching a series of significant lows and swing points where liquidity could be swept, potentially providing a signal for a reversal of the current bearish impulse.
The July 14 economic calendar includes three scheduled events, two of which can be considered significant. As a result, macroeconomic developments are expected to influence market sentiment during the second half of Tuesday's trading session.
In my view, the pair remains in the process of forming a bullish trend. Although the fundamental backdrop shifted sharply in favor of the bears four months ago, the broader trend cannot yet be considered invalidated or complete. Therefore, the bulls could launch another advance after liquidity is swept below clearly defined lows. However, opening long positions at the current stage is not advisable. It would be better to wait until bullish chart patterns emerge.
At present, traders are monitoring two bearish imbalances, one of which has already been invalidated. I would also draw attention to the proximity of four significant swing points where liquidity has already been swept, as well as the questionable fundamental basis behind the U.S. dollar's strength. Consequently, I continue to expect a bullish advance, but I would first like to see technical confirmation of that scenario—or alternatively, wait for a new sell signal to emerge within imbalance 17.
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