At the start of the new week, the EUR/USD pair continues to trade within a mild corrective pullback. It cannot be said that there has been no news this week, as on Monday it became known that the second round of negotiations between Iran and the United States had been canceled. On Tuesday, however, reports emerged that the talks would still take place, and JD Vance, along with his working group, had already departed for Islamabad. It is worth recalling that the two-week truce expires on Wednesday, April 22, making today the last chance to at least extend it. Donald Trump has already threatened to destroy all power plants and bridges in Iran if the negotiations fail, meaning the military conflict could resume as early as tomorrow. Bears are not yet eager to launch a new offensive, as the truce technically remains in place and the situation could still change multiple times before Wednesday. The market is awaiting a resolution.
Last week, a reaction was observed at the bullish imbalance 12, which triggered the bulls' advance. Thus, traders had the opportunity to open long positions, which are currently in solid profit. Now traders can decide for themselves what to do with these positions: lock in profits or wait for further growth. Partial profit-taking is also an option. The geopolitical backdrop has improved compared to two weeks ago, which likely explains the sharp improvement in bullish sentiment. However, sentiment could quickly shift in favor of bears if the Middle East conflict resumes. From a technical standpoint, no bearish signals or patterns have formed, so I am not expecting a decline in the euro for now.
It is also worth noting that the US dollar's growth over the past one and a half to two months has been driven entirely by geopolitics. As soon as the US and Iran agreed to a two-week ceasefire, bears immediately retreated and bulls took control. At present, the truce remains fragile but intact, despite failed negotiations last Saturday and their cancellation on Monday. I have repeatedly stated that I do not believe the bullish trend has ended, despite the break of key structural lows. The price movement over the past two months could evolve into a bearish trend only if geopolitical conditions deteriorate even further. But how much worse can things get? Much of the worst-case scenario has already been priced in. Markets often anticipate the most pessimistic outcomes in advance. Therefore, it is possible that traders have already fully priced in the Middle East conflict.
The technical picture is currently clear. First, the price showed no reaction to imbalance 11, meaning no sell signal was formed. Second, the price reacted to imbalance 12, generating a bullish signal within a bullish trend. Third, a new bullish imbalance 13 has formed, which serves as a zone of interest for future buy trades and as a support area for the euro.
Tuesday's news background was extremely weak. ZEW economic sentiment indices were released in Germany and the eurozone, while in the US, the weekly ADP report and initial jobless claims data were published. None of these reports triggered any notable reaction among traders.
There are still many reasons for bulls to attack in 2026, and even the outbreak of war in the Middle East has not reduced them. Structurally and globally, Trump's policies—which led to a significant decline in the dollar last year—have not changed. In the near term, the US dollar may still show strength due to risk aversion, but this factor requires continuous escalation in the Middle East, which is unsustainable. After just two weeks of calm, the euro recovered by 300 points. There are no other strong supporting factors for the dollar. I still do not believe in a sustained bearish trend for the euro. The dollar has received temporary support, but what will drive bears in the long term?
Economic calendar for the US and the eurozone:
Eurozone – Speech by ECB President Christine Lagarde (17:30 UTC)
On April 22, the economic calendar contains only one entry, which does not appear particularly significant. The impact of the news flow on market sentiment on Wednesday is expected to remain weak.
EUR/USD forecast and trading advice:
In my view, the pair remains in the process of forming a bullish trend. The information backdrop shifted sharply two months ago, but the trend itself cannot be considered canceled or completed. Thus, bulls may well continue their advance in the near term, provided geopolitics does not suddenly shift toward renewed escalation.
Bulls had the opportunity to open long positions based on the signal from imbalance 12 with a target around 1.1670. This target has long been reached, and the upward movement may continue toward this year's highs. A new imbalance 13 has also formed, which may provide another bullish signal in the future. For uninterrupted euro growth, the Middle East conflict would need to move toward a stable peace, which is not currently the case. However, bears are not gaining additional reasons to attack either. In the near term, I would rely primarily on technical analysis.
