EUR/USD continued to decline on Wednesday after rebounding from the 61.8% Fibonacci retracement level at 1.1578, moving toward the 76.4% Fibonacci level at 1.1514. Bearish pressure remained extremely weak despite developments in the Middle East and another increase in US inflation. Today, a rebound from the 1.1514 level could trigger a reversal in favor of the euro and support a move back toward 1.1578. A consolidation below 1.1514 would signal a continuation of the decline toward the next Fibonacci retracement level of 100.0% at 1.1409.

The wave structure on the hourly chart remains straightforward. The most recent completed upward wave broke above the previous peak, while the latest downward wave broke below the previous low. Therefore, the trend has shifted back to bearish. Bulls may launch a new advance only if Iran and the United States sign an interim agreement, stop violating the ceasefire terms, and the Strait of Hormuz remains open. Without these developments, further gains in the euro are likely to be extremely limited.

There were several important developments on Wednesday. First, Iran resumed attacks on US military bases in the Middle East in response to Washington's strike on its own military facilities. Donald Trump stated that his patience had run out but changed his position by the following morning after what he described as "a call from Iran." As a result, another escalation of the conflict appears to have been avoided for now. Second, US inflation accelerated to 4.2% year-over-year in May, in line with market expectations. Since the latest exchange of strikes did not lead to a renewed war and the inflation data matched forecasts, traders found little reason to react to either development. In a few hours, the results of the European Central Bank meeting will be announced, and traders may once again find little to respond to. It became clear last week that the ECB was preparing to tighten monetary policy, so a rate hike decision today is unlikely to trigger strong buying pressure from bulls.

On the 4-hour chart, the pair rebounded from the 38.2% Fibonacci retracement level at 1.1667 and resumed its decline within a downward trend channel. A consolidation below the 23.6% Fibonacci level at 1.1569 supports expectations of a continued decline toward the next Fibonacci retracement level of 0.0% at 1.1411. I will begin to expect a bullish trend only after prices close 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 the seven weeks of February and March, the bulls' overwhelming advantage disappeared due to the war in Iran, while the past ten weeks have seen market positioning become more balanced amid the suspension of hostilities in the Middle East. The total number of long contracts held by speculators now stands at 235,000, compared with 186,000 short positions. The gap is once again widening in favor of the bulls.

Overall, large institutional traders continue to maintain a constructive long-term view on the euro. Naturally, various global developments, which have been abundant in recent years, continue to influence investor sentiment. At present, market attention remains 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 and economic data, and more on developments in Iran.

Economic Calendar for the United States and the Eurozone

• Eurozone – ECB Interest Rate Decision (12:15 UTC).
• United States – Producer Price Index (PPI) (12:30 UTC).
• United States – Initial Jobless Claims (12:30 UTC).
• Eurozone – ECB Press Conference (12:45 UTC).

The June 11 economic calendar contains several scheduled events, with the ECB meeting clearly standing out as the key event. The economic backdrop may influence market sentiment during the second half of Thursday's session.

EUR/USD Forecast and Trading Tips

Short positions were possible following a rebound from the 1.1578 level, targeting 1.1514. New short positions may again be considered on another rebound from 1.1578 with the same target. Long positions may be opened on a rebound from 1.1514 with targets at 1.1578 and 1.1630. Alternatively, buying opportunities may emerge following a close above 1.1578.

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.