The EUR/USD pair rebounded from the 50.0% Fibonacci retracement level at 1.1472 on Thursday and declined toward the 38.2% Fibonacci level at 1.1438. A rebound from this level today would favor the euro and signal a resumption of growth toward the 1.1472 and 1.1507 levels based on the updated Fibonacci retracement grid. Consolidation below 1.1438 would favor the US dollar and open the way for a further decline toward the 23.6% Fibonacci retracement level at 1.1395.
The wave structure on the hourly chart remains bearish despite the bulls' prolonged advance. The latest completed downward wave failed to break the previous low, while the most recent upward wave has not yet surpassed the previous high. Geopolitical tensions have escalated again as Iran and the United States have resumed blockades in the Strait of Hormuz and active military operations. It will only be possible to confirm the end of the bearish trend once the 1.1473 high is broken, but the bulls have demonstrated little strength over the past three weeks.
Thursday's news background was very light, but the bears still received modest support from the Philadelphia Fed Manufacturing Index and reports that the United States has been conducting strikes against Iran for six consecutive days. Donald Trump has threatened to destroy all power plants in the country unless Tehran returns to the negotiating table, while Iran has responded with threats to block the Bab el-Mandeb Strait and the Red Sea. It should be noted that this is another critically important route for energy exports from the Middle East to global markets. Therefore, if both key maritime chokepoints were blocked simultaneously, oil prices could potentially double, triggering a sharp surge in global inflation and forcing central banks to tighten monetary policy further. The situation in the Middle East remains highly explosive. On Friday, the eurozone will release its inflation report, although traders have already seen the preliminary estimate. The bulls may resume buying today.
On the 4-hour chart, the pair remains in a sideways range. Consolidation above 1.1411 suggests the possibility of further gains; however, price direction has changed too frequently in recent sessions, while trading activity remains subdued. No emerging divergences are currently observed on any indicator. The descending trend channel remains intact.
During the latest reporting week, professional traders closed 12,228 long positions and opened 5,098 short positions. Over the seven weeks spanning February and March, the bulls' overwhelming advantage disappeared because of the war involving Iran, while during the past fifteen weeks, market positioning has become more balanced amid the suspension of hostilities in the Middle East. Speculative traders currently hold approximately 223,000 long positions and 239,000 short positions.
Overall, large institutional traders continue to maintain a constructive long-term view of the euro. Naturally, the wide range of global events that have dominated recent years continues to influence investor sentiment. In particular, the market remains focused on developments in the Middle East, where military operations have paused and negotiations have begun, potentially paving the way for a lasting peace agreement. At the same time, the market continues to largely ignore the improvement in geopolitical conditions, as well as several other factors that support the euro.
Eurozone
United States
The economic calendar for July 17 contains five scheduled releases, none of which I consider particularly important. As a result, macroeconomic data are expected to have only a limited impact on market sentiment on Friday, mainly during the second half of the day.
Long positions may be considered today following a rebound from the 1.1438 level on the hourly chart, targeting 1.1472 and 1.1507. Alternatively, long positions may also be considered after a confirmed close above 1.1472. Short positions may be considered following a confirmed close below 1.1438 on the hourly chart, targeting 1.1395. Market movements remain extremely subdued.
Fibonacci retracement levels are drawn from 1.1620 to 1.1325 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.
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