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The EUR/USD pair continues to rise, with the move beginning after two liquidity sweeps marked by red lines on the chart. Imbalance 17 restrained the bulls' advance for a long time and still cannot be considered invalidated, as the base of the imbalance—the 1.1620 level—has not been broken. However, I think it is already clear to all traders that this pattern is no longer actionable and can be disregarded. A new pattern formed this week—the bullish Imbalance 20—which now plays the key role. This pattern may either provide a new buy signal or become invalidated. In the first case, the bullish advance will continue; in the second, bears will attempt to regain control of the market.
In my view, the fundamental backdrop continues to fully support the bulls. First, it is clear on any chart that the European currency is trading well below its average level over the past year. Second, the market no longer expects the FOMC to tighten monetary policy in September. Third, the market has begun to question whether the Fed under Kevin Warsh can do everything necessary to bring inflation back to its target level. Fourth, U.S. economic data have recently been disappointing. Fifth, geopolitical developments no longer support the bears or the dollar. Sixth, the ECB may tighten monetary policy once again this autumn. Therefore, I see no reason for a bearish advance.
As I warned in recent weeks, if the labor market once again produces a weak result, this will be a sufficiently strong reason for the Fed to refrain from raising rates. Of course, this cannot be stated with complete certainty, as there is still one more inflation report and one more labor-market report due before the September FOMC meeting. However, I am almost certain that the Fed will adopt a wait-and-see approach in September. Almost all traders are now abandoning their hawkish expectations for September.
Let me remind you that expectations regarding Fed monetary policy are always just expectations and can change in response to geopolitical developments or economic data. The latest U.S. labor-market data showed weak figures, inflation slowed, and GDP growth decelerated. These three factors raise doubts about an FOMC rate hike not only in September but also in the foreseeable future. If the Strait of Hormuz is reopened soon, this will only ease energy-related pressure and allow inflation to continue declining, further weakening the bears' prospects. In my view, the bears' only current opportunity lies in a new escalation and a prolonged blockade of the Strait of Hormuz.
The current chart structure points to a highly probable continuation of the bullish momentum. Bearish Imbalance 17 was tested, the reaction to it was weak, and the pattern can now be considered invalidated. Bullish Imbalance 19 remains untested. A new bullish Imbalance 20 has formed and may provide traders with a buy signal as early as today or tomorrow. Therefore, the bulls currently have much stronger positions and prospects than the bears.
The economic backdrop on Wednesday was extremely weak for both the European and U.S. currencies, and the only major event ahead is the FOMC minutes. In my view, these minutes are not only of little value but could also be misleading, as the market may draw completely incorrect conclusions based on information that is three weeks old. Three weeks ago, the FOMC may have had a hawkish stance, whereas it may no longer have that stance now. However, the minutes will reflect that hawkish stance, which may no longer be relevant. Let me remind you that enough U.S. economic data have been released over the past three weeks for the Fed to abandon monetary policy tightening in September.
There are still numerous reasons for the bulls to advance in 2026, and even the outbreak of war in the Middle East has not reduced their number. Structurally and globally, Trump's policy, which led to a significant decline in the dollar last year, has not changed. At present, I see no significant factors supporting the U.S. currency despite the FOMC's formally hawkish stance. Geopolitical developments, which supported demand for the U.S. currency during much of the first half of 2026, can no longer do so. The conflict in the Middle East remains unresolved, but there have been no new hostilities from either Iran or the United States.
On August 20, the economic calendar contains two entries, but I would not consider either of them important. The economic backdrop will most likely have no impact on market sentiment on Thursday.
In my view, the pair remains in the process of forming a bullish trend. The fundamental backdrop shifted sharply in favor of the bears six months ago, but the trend itself cannot be considered invalidated or complete. Therefore, the bulls may well continue their advance after two liquidity sweeps from clearly defined lows. At present, bullish traders have support in the form of Imbalance 20. A new buy signal may form in the near future. I consider 1.1686 and 1.1797 to be the targets for the European currency's next advance.
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