On Thursday, the EUR/USD pair declined to the 76.4% Fibonacci retracement level at 1.1514, rebounded from it, and then advanced toward the 61.8% Fibonacci level at 1.1578. A rebound from this level today would allow traders to anticipate a reversal in favor of the U.S. dollar and a return to 1.1514. A consolidation above 1.1578 would increase the likelihood of further gains toward the next retracement level at 1.1630 (50.0%).

The wave structure on the hourly chart remains straightforward. The most recently completed upward wave exceeded the previous peak, while the latest downward wave (which is still developing) broke the previous low. Therefore, the trend remains bearish. Bulls may launch a new offensive only if Iran and the United States reach an interim agreement, cease violating the terms of the ceasefire, and the Strait of Hormuz is reopened. Without these developments, further appreciation of the euro will be extremely difficult.

There was no shortage of important global events on Thursday. In my view, the most significant was the ECB meeting, as the eurozone regulator tightened monetary policy for the first time in the past three years. I believe this event should have been a major market catalyst. However, it seems I was the only one who held that view. The euro received no support from traders following the interest rate increase, and market participants largely ignored both the rate hike and Christine Lagarde's remarks regarding the possibility of continued policy tightening through the end of the year.

The ECB President stated that several scenarios remain possible regarding the conflict in the Middle East, and the most pessimistic of them would force the Monetary Policy Committee to continue tightening policy. Inflation remains elevated and continues to show upward pressure due to rising energy prices. If the conflict between Iran and the United States persists, oil and natural gas prices are likely to continue increasing, fueling further inflationary pressures.

Thus, the ECB did more than simply raise interest rates in June—it effectively initiated a new monetary tightening cycle. In my view, this should have provided a strong reason for bulls to take action. However, they only became active after comments from Donald Trump, who reversed his previous stance on military action against Iran and once again spoke about the possibility of reaching an agreement in the near future.

On the 4-hour chart, the pair rebounded from the 38.2% Fibonacci retracement level at 1.1667 and resumed its decline within a descending trend channel. A consolidation above the 23.6% Fibonacci level at 1.1569 would support further gains in the euro toward the 38.2% retracement level at 1.1667. I will begin to consider a bullish trend only after the euro closes above the channel. No emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 12,387 Long positions and closed 7,053 Short positions. Over seven weeks in February and March, the bulls' overwhelming advantage disappeared due to the war involving Iran, while over the past ten weeks the balance has stabilized amid a pause in hostilities in the Middle East.

The total number of Long positions held by speculators currently stands at 235,000, while Short positions amount to 186,000. The gap is once again widening in favor of the bulls.

Overall, large market participants continue to maintain a favorable long-term outlook on the euro. Naturally, global events of various kinds—which have been abundant in recent years—continue to influence investor sentiment. At present, market attention remains firmly focused on the Middle East, where the conflict has merely been paused rather than resolved. Therefore, in the near term, the direction of the euro and the dollar will depend less on Federal Reserve or ECB monetary policy, or on economic data, and more on developments involving Iran.

News Calendar for the United States and the European Union:

• United States – University of Michigan Consumer Sentiment Index (14:00 UTC).

The June 12 economic calendar contains only one event, which is unlikely to be considered significant. As a result, the impact of the economic backdrop on market sentiment on Friday is expected to be very limited or absent altogether.

EUR/USD Forecast and Trading Recommendations:

Short positions were possible following a rebound from the 1.1578 level, targeting 1.1514. New short positions may be considered upon another rebound from 1.1578 with the same target. Long positions could be initiated following a rebound from 1.1514, targeting 1.1578. Additional long positions may be considered after a close above 1.1578, targeting 1.1630.

Fibonacci retracement grids are drawn from 1.1409 to 1.1850 on the hourly chart and from 1.2081 to 1.1411 on the 4-hour chart.