EUR/USD traded within Imbalance 13 for two consecutive weeks, attempting to form a buy signal within that zone. As of Friday, June 5, it appears that bullish expectations have been undermined. Interestingly, this time the bears resumed selling pressure not because of geopolitical tensions in the Middle East. Instead, the decisive factor was the latest U.S. labor market and unemployment data, which will be discussed below.
As a result, the pair has now fallen well below Imbalance 13, making it likely that this pattern will be invalidated. If that occurs, traders will be left with a sell signal from Bearish Imbalance 15, and the technical picture could shift dramatically. However, even under current conditions, bulls still retain some hope for a recovery. Today's candlestick may simply represent a liquidity sweep below the most recent lows, while the signing of a memorandum of understanding between Iran and the United States over the weekend—as suggested by Donald Trump—could sharply reduce demand for the U.S. dollar. Therefore, although today's U.S. data was genuinely strong, it is unlikely to support dollar strength for another one or two weeks on its own.
Market direction and trader 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 in negotiations on the nuclear issue, bears may be forced to retreat, allowing the euro and the pound to resume their upward movement. However, the probability of such an optimistic scenario appears to be declining with each passing day.
Under current conditions, traders can only anticipate further downside following the reaction from Bearish Imbalance 15 and the formation of new patterns. If geopolitical developments begin to favor bulls—that is, if an agreement between Iran and the United States is reached in the foreseeable future—the euro may resume its advance in line with the broader bullish trend. However, it is now unclear how far the euro could decline before that occurs. The current technical picture provides stronger support for the U.S. dollar.
It is worth noting once again that the dollar's entire rally between January and March was driven primarily by geopolitical developments. As soon as the United States and Iran agreed to a ceasefire, bears retreated, and bulls dominated trading for more than a month. At present, the likelihood of a broader agreement appears to be declining again, while the market remains highly skeptical of reports suggesting an imminent resolution of the conflict or a deal between Iran and the United States. Consequently, geopolitics continues to exert underlying pressure on EUR/USD.
Friday's economic data triggered a sharp and decisive move by the bears. The U.S. economy added 172,000 jobs in May, while April's figure was revised upward to 179,000. As a result, the Nonfarm Payrolls report delivered a double blow to bullish sentiment and the euro. Today's dollar rally is fully justified by the data, but further gains are likely only if Iran and the United States fail to reach an agreement in the near future.
Bulls still have numerous reasons to remain active in 2026, and the outbreak of conflict in the Middle East has not significantly reduced them. Structurally and globally, the policies that contributed to the dollar's sharp decline last year have not changed. In the coming months, the U.S. dollar may occasionally strengthen amid risk-off flows, but this factor would require continued escalation of tensions in the Middle East. I still do not believe in a sustainable bearish trend for the euro. The dollar has received temporary support, but it remains unclear what factors could provide bears with a lasting advantage over the longer term.
News Calendar for the United States and the Eurozone
June 8: The economic calendar contains no significant releases. Therefore, the economic backdrop is unlikely to influence market sentiment on Monday.
EUR/USD Forecast and Trading Tips
In my view, the pair remains in the process of forming a broader bullish trend. The fundamental backdrop changed significantly three months ago, but the trend itself cannot yet be considered invalidated or complete. Therefore, bulls may resume their advance if they receive even modest support from geopolitical developments.
At present, traders can only maintain short positions initiated from Bearish Imbalance 15 and wait for new patterns to emerge. The decline in the pair has been driven by objective factors. Without the strong U.S. labor market and unemployment data, the support zone associated with Imbalance 13 would likely have held. However, that support failed, giving bears an opportunity to launch a stronger offensive. Geopolitical developments remain the key market driver.
