The EUR/USD pair remains within the local bearish impulse that began on April 17, while over the past four weeks bulls have done little more than halt the bears' advance. The latest liquidity sweep signalled that the decline was likely to resume, which is exactly what we have been seeing over the past two weeks. It is difficult to say how deep or prolonged this new decline may be, but the bears have one clear target—the latest swing low at 1.1325. A liquidity sweep below that low could give bulls a second chance to regain control.
As for the fundamental backdrop, I still see little justification for the bears' continued strength. Geopolitical tensions remain a negative factor, but they are unlikely to be the key driver for traders, given that the market barely reacted to either the temporary ceasefire or the reopening of the Strait of Hormuz. Last week, the ECB left its monetary policy unchanged, but it is difficult to argue that this alone justifies selling the euro. Tomorrow, the Federal Reserve is also expected to leave interest rates unchanged. So what exactly has the market been pricing in for the past month and a half? A Fed rate hike this winter? It increasingly appears that traders themselves are uncertain about what to expect, which explains the unusually erratic price action.
It is worth remembering that expectations of tighter Fed policy remain just that—expectations. Recent US labour market data were relatively weak, while inflation continued to ease. Together, slowing employment growth and moderating inflation raise doubts that the FOMC will begin raising interest rates in the foreseeable future. Personally, I remain unconvinced that the Fed will necessarily tighten policy this year, or that any potential rate increase would be anything more than a one-off move intended to avoid provoking Donald Trump.
Geopolitics has moved into the background. Tehran and Washington have abandoned the agreement reached on June 17, but this development came as no surprise to the market. Donald Trump has reinstated sanctions on Iranian oil and renewed restrictions on Iranian shipping, while Iran has once again blocked the Strait of Hormuz and continues attacking vessels attempting to pass through it without authorisation. A month ago, the market failed to deliver the widely expected decline in the US dollar as geopolitical tensions eased, and the euro also failed to rally following the ECB's monetary tightening one and a half months ago. Despite both the news flow and the geopolitical backdrop, the bears remain firmly in control. Now that geopolitical tensions have escalated again, bears have at least a formal justification for further selling. Even so, in my view, strained US-Iran relations alone are no longer sufficient to sustain a bearish trend.
The current technical picture continues to point to the bearish impulse that began on April 17. Bearish Imbalance 17 has yet to be filled, while Imbalance 18 was invalidated after weak US labour market data. No bullish patterns have formed, and none are likely to appear in the coming days given that the market has remained largely range-bound for the past month. Bulls could still resume a corrective recovery towards Imbalance 17, but there is currently no technical basis for trading such a move. Liquidity has already been taken below the August 1 low from last year (marked by the red line on the chart), followed shortly afterwards by a liquidity sweep above the July 2 high. As a result, the bears still have technical grounds for maintaining pressure, although no new bearish patterns have emerged either.
The economic calendar on Tuesday was effectively empty. Trading activity remained extremely subdued, while the ADP employment report and the Conference Board Consumer Confidence Index attracted little attention. Price action throughout the day was minimal, leaving virtually nothing of significance to analyse. There was no meaningful news and no meaningful movement.
There are still numerous reasons why bulls could regain control in 2026, and the conflict in the Middle East has done little to change that broader picture. Structurally and fundamentally, Trump's policies—which contributed to the sharp decline in the US dollar last year—remain largely unchanged. At present, I see few compelling long-term drivers supporting the US dollar, despite the FOMC's hawkish stance. Nevertheless, bears continue to dominate the market, while bullish signals remain absent.
Economic Calendar (US and Eurozone)
United States
- FOMC Interest Rate Decision — 18:00 UTC
- FOMC Press Conference — 18:30 UTC
The economic calendar for July 29 contains two major events, both of which are highly significant. Recently, bulls have ignored news that was favourable to them, while bears have continued selling even without fundamental support. As a result, the economic backdrop could have a strong impact on market sentiment on Wednesday, but only during the evening session.
EUR/USD Forecast and Trading Tips
In my view, the pair remains in the process of forming a longer-term bullish trend. Although the fundamental backdrop shifted sharply in favour of the bears five months ago, the broader uptrend cannot yet be considered invalidated. Bulls may well launch another advance after liquidity is taken below the key swing lows. However, opening long positions at the current stage would be imprudent, risky, and unsupported by technical signals. Any attempt to buy without technical confirmation would amount to little more than speculation. At present, there are no bullish patterns on the chart. The only notable technical structure available to bears remains Bearish Imbalance 17, which has yet to be filled.
