02.06.202620:15 Forex Analysis & Reviews: EUR/USD – Smart Money Analysis: Eurozone Inflation Matches Expectations

For the second consecutive week, EUR/USD has been attempting to reverse in favor of the euro and resume its upward movement in line with the bullish trend originating from Imbalance 13. However, at this point, it can be said that the bulls lack sufficient strength for a new advance. The technical picture clearly indicates that the reaction to the bullish imbalance has been weak and unconvincing, while the reaction to Bearish Imbalance 15 has been precise and well-defined.

Therefore, I believe the probability of a new bearish attack this week is considerably higher than the probability of renewed bullish activity. The bulls had an opportunity to take control, but they failed to capitalize on it.

Today, the Eurozone released an important inflation report for May, which fully matched traders' expectations. However, whether the figures matched forecasts is not the key issue. The renewed acceleration in consumer prices provides the European Central Bank with an opportunity to tighten monetary policy at its next meeting. Logically, bulls should have launched a fresh advance today, as the Federal Reserve is almost certainly focused on other issues in June rather than raising interest rates.

However, price action and market sentiment will continue to depend primarily on geopolitical developments. If Tehran and Washington ultimately sign a memorandum of understanding, extend the ceasefire, and make progress on nuclear negotiations, it will become much easier for bulls to regain control, and both the euro and the pound could resume their upward trends.

The problem is that the probability of such an optimistic scenario appears to be declining with each passing day.

Under current conditions, traders can only wait for either a reaction from Imbalance 13—the last bullish pattern within the current bullish impulse—or its invalidation. If the recent decline is viewed as a corrective pullback, it could reasonably conclude within Imbalance 13. However, without geopolitical support, bulls will struggle to launch a meaningful advance, which is exactly what the market has demonstrated over the past two weeks.

If the current movement is interpreted as the beginning of a new bearish trend, then traders should expect negotiations to fail and the conflict to intensify again. In that case, a sell signal has already formed within Bearish Imbalance 15.

It is worth emphasizing once again that virtually all of the US dollar's strength between January and March was driven by geopolitical developments. As soon as the United States and Iran agreed to a ceasefire, bears immediately retreated, and bulls dominated trading activity for more than a month.

At present, the likelihood of an agreement is declining once again. The market remains highly skeptical of any reports suggesting an imminent resolution of the conflict or a deal between Iran and the United States. More precisely, a deal will probably be signed eventually. However, "eventually" is not the timeframe required to support a strong advance in EUR/USD.

The overall technical picture remains relatively clear. The bullish trend remains intact, but it desperately needs support. Ideally, that support should come from geopolitics—a framework agreement between Iran and the United States followed by continued negotiations regarding Iran's nuclear program.

Without a positive news backdrop, a renewed advance in the euro appears unlikely.

The economic backdrop on Tuesday favored the bulls. As already noted, the May inflation report did not exceed expectations—which would have been even more supportive for the euro—but it still confirmed accelerating price growth. As a result, the ECB should now have fewer doubts regarding further policy tightening.

However, it appears that today's buying activity was driven more by Trump's latest statements than by the inflation data itself.

There are still numerous reasons for bulls to remain active in 2026, and the outbreak of conflict in the Middle East has not significantly reduced them. Structurally and fundamentally, Trump's policies—which contributed to a substantial decline in the dollar last year—have not changed.

Over the coming months, the US dollar may periodically strengthen as investors seek safe-haven assets, but this factor requires continuous escalation in the Middle East to remain effective. I still do not believe in a sustained bearish trend for EUR/USD. The dollar has received temporary support from market sentiment, but what will allow bears to maintain pressure over the longer term?

Economic Calendar for the United States and the Eurozone

• Germany – Services PMI (07:55 UTC).
• Eurozone – Services PMI (08:00 UTC).
• United States – ADP Employment Change (12:15 UTC).
• United States – ISM Services PMI (14:00 UTC).

The June 3 economic calendar contains four scheduled releases, with the US reports being the most noteworthy. Economic data may influence market sentiment during the second half of Wednesday's trading session.

EUR/USD Forecast and Trading Tips

In my view, the pair remains in the process of forming a bullish trend. The fundamental backdrop changed sharply three months ago, but the trend itself cannot yet be considered invalidated or completed.

Therefore, bulls may still resume their advance in the near term if geopolitical developments provide even modest support.

Traders previously had opportunities to open long positions based on signals from Imbalance 12 and the Order Block. The upward trend could resume toward this year's highs from Imbalance 13. However, it is now critical that bulls maintain control of the market.

For the euro to continue rising without significant obstacles, developments in the Middle East must move toward a sustainable peace. A breakdown in negotiations, rejection of a framework agreement by either side, or another ceasefire violation could strengthen bearish pressure.

A sell signal has already formed within Bearish Imbalance 15. If geopolitical conditions fail to improve this week, a decline toward 1.1500 will become increasingly likely. Nevertheless, Bullish Imbalance 13 continues to serve as a strong support zone.