The EUR/USD pair reversed in favor of the U.S. dollar, broke through bullish imbalance 14, and reacted to imbalance 13. The euro's decline last week was notably sharp and unexpected. It cannot be called groundless, but it began too suddenly and sharply. I do not dispute that the failure of negotiations between Iran and the United States is a valid reason for renewed demand for the dollar. However, this is not the first time Tehran and Washington have failed to reach an agreement. At the same time, the war has not resumed, which suggests that both sides still want to find a solution to the difficult situation. Therefore, I believe the euro's decline is linked to the market losing confidence in a successful outcome to the negotiations in the near future. At present, if the market is not fully convinced that the war will resume, it is at least seriously considering that possibility. But just as traders previously received no confirmation of a deal between Iran and the U.S., they are likewise receiving no confirmation now that the conflict will resume. Thus, the euro may still emerge from the difficult situation it faced last week without major damage. Imbalance 13 is not only a bullish pattern within a bullish trend — it is also a support zone. The bulls have retreated, but they have not surrendered.

In the current situation, traders can only wait for the market's reaction to imbalance 13, which is the last bullish pattern within the current bullish impulse — or for its invalidation. If we view the pair's decline as a corrective pullback, it could very well end within imbalance 13. I would remind you that patterns alone do not provide entry opportunities. Signals must form on lower timeframes, such as a structural break or bullish patterns. In other words, signs of a reversal must appear. If they do not, then there is no signal. Therefore, at present, I am waiting for a reaction to imbalance 13. The euro's rise on Monday gave hope for a resumption of the bullish impulse, but by Tuesday the quotes had once again moved lower.

I cannot help but point out once again that all of the U.S. dollar's growth between January and March was driven solely by geopolitics. As soon as the United States and Iran agreed to a ceasefire, the bears immediately retreated, and for more than a month the bulls dominated the market. At the moment, the ceasefire is hanging by a thread, but negotiations have not completely stopped and the chances for peace remain. Unfortunately, traders themselves increasingly doubt a full resolution to the conflict and a comprehensive agreement between Iran and the United States. More precisely, a deal will probably eventually be signed. But "eventually" is not enough for the market. If, hypothetically, the agreement is signed a year from now, traders are unlikely to remain optimistic today and continue selling the U.S. dollar.

The broader technical picture remains relatively clear. The bullish advance remains intact, but it urgently requires support. Ideally, that support would come from geopolitics — Iran and the United States resuming negotiations and finally beginning to make concessions. Without a positive news background, it will be difficult for the euro to resume its upward movement.

The economic backdrop on Tuesday was practically nonexistent, as the only report — the ADP employment report — generated no market interest, while the main movement occurred before its release. Thus, it is reasonable to conclude that the market once again began pricing in a worse-case scenario in the Middle East, which explains the latest decline.

The bulls still have many reasons to remain active in 2026, and even the outbreak of war in the Middle East has not reduced their number. Structurally and globally, Trump's policies — which led to the dollar's substantial decline last year — have not changed. In the coming months, the U.S. currency may periodically strengthen amid investor flight from risk, but this factor requires continuous escalation of the Middle East conflict. I still do not believe in a sustained bearish trend for EUR/USD. The dollar has received temporary support from the market, but what fundamental factors would allow the bears to dominate in the long term?

Economic Calendar for the U.S. and the Eurozone:

• Germany – Producer Price Index (06:00 UTC)
• Eurozone – Consumer Price Index (09:00 UTC)
• U.S. – FOMC Minutes (18:00 UTC)

The May 20 economic calendar contains three secondary events. The impact of economic data on market sentiment on Wednesday is again expected to remain limited.

EUR/USD Forecast and Trading Tips:

In my opinion, the pair remains in the process of forming a bullish trend. The news background changed sharply three months ago, but the trend itself cannot yet be considered canceled or completed. Therefore, the bulls may well resume their advance in the near future if geopolitics does not continue undermining traders' confidence in a positive resolution to the conflict.

Traders previously had opportunities to open long positions based on signals from imbalance 12 as well as from the order block. The upward movement may resume toward the yearly highs from imbalance 13. However, in the coming days it will be important for the bulls to maintain control of the market. For uninterrupted euro growth, the Middle East conflict must move toward a stable peace, and occasional signs of de-escalation do appear from time to time — though still rarely. Bullish traders currently lack sufficient support for a new upward impulse. The zone for new buying opportunities is 1.1605–1.1649.