The EUR/USD pair remains within the local bearish impulse that began on April 17, while over the past three weeks bulls have managed only to push bears back slightly. The euro's gains have been limited. The bulls have made their move, but the pair's further prospects will depend on geopolitical developments, inflation data, and signals from the Federal Reserve.

This week, it became known that US inflation slowed to 3.5% year-on-year, rather than the 3.8% expected by the market, significantly reducing the likelihood of further Federal Reserve monetary policy tightening in the near term. I do not believe the Fed will abandon the idea of raising interest rates altogether, but inflation nevertheless slowed by 0.7 percentage points in a single month.

This week also featured testimony by Federal Reserve President Kevin Warsh before Congress. As I had expected, Warsh's rhetoric remained broadly unchanged from the Fed's press conference a month ago, and he once again emphasized that elevated inflation remains a concern in the United States. However, the market had anticipated more hawkish remarks and did not receive them. As a result, the US dollar neither gained meaningful support this week nor suffered significant losses. For the past three weeks, neither bulls nor bears have shown much willingness to take decisive action, leaving the pair largely range-bound.

It is also worth recalling that the latest US labor market data remained relatively weak. Job creation continues to disappoint. Over the past three months, the number of new jobs has been approximately 100,000 below market expectations. As a result, the combination of slowing labor market momentum and easing inflation is forcing the Federal Open Market Committee (FOMC) to weigh any decision on further monetary tightening much more carefully.

Geopolitical developments have temporarily faded into the background. Tehran and Washington have once again violated the terms of the ceasefire agreement reached on June 17, but this came as little surprise to market participants. Donald Trump signed an executive order revoking authorization for Iranian oil exports, reinstated restrictions on Iranian shipping, while Iran once again closed the Strait of Hormuz and attacked vessels attempting to transit the waterway.

The market barely reacted to the end of the conflict and therefore is unlikely to respond strongly to its renewed escalation. We did not see the widely expected weakening of the US dollar following the easing of geopolitical tensions, nor did we witness sustained euro strength after the European Central Bank tightened monetary policy. Bears remain resilient despite both the fundamental and geopolitical backdrop. Now that geopolitical tensions are escalating again, bears have at least a formal justification for launching another wave of selling. In my opinion, however, traders are pricing in geopolitical developments for the third time, including events that have not yet occurred.

The current technical picture continues to indicate that the bearish impulse that began on April 17 remains intact. Bearish Imbalance 17 has not yet been filled, while Imbalance 18 was invalidated following weak US labor market data. No bullish patterns have formed, and none are likely to appear in the coming days as the market remains largely directionless.

Therefore, bulls may continue the corrective advance toward Imbalance 17, but there is currently no clear technical basis for trading this move. It is also worth noting that liquidity has been taken below the August 1 low (marked by the red line on the chart). Shortly afterward, liquidity was also taken above the July 2 high. Consequently, bears now have even more reasons to resume selling pressure. However, it should be remembered that liquidity grabs are not trading patterns in themselves.

Friday's economic calendar was once again relatively quiet. The eurozone released its June inflation report, while the United States published data on Housing Starts and Building Permits. These releases had virtually no impact on the US dollar, much like most economic reports this week, with the exception of inflation data.

Bulls still have numerous reasons to resume buying the euro in 2026, and even the renewed conflict in the Middle East has not materially changed that outlook. 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 strong fundamental factors supporting the US dollar despite the FOMC's hawkish stance.

EUR/USD has now approached a series of significant lows and swing points where liquidity may be taken, potentially providing the catalyst for a reversal of the current bearish impulse.

Economic Calendar for the United States and the Eurozone

The economic calendar for July 20 contains no significant scheduled releases. As a result, macroeconomic data are unlikely to influence market sentiment on Monday.

EUR/USD Forecast and Trading Recommendations

In my view, the pair remains in the process of forming a bullish trend. Although the fundamental backdrop shifted sharply in favor of the bears four months ago, the broader trend cannot yet be considered invalidated or complete.

Therefore, bulls may begin a fresh advance after liquidity has been taken below clearly established lows. However, opening long positions at this stage is not advisable. Traders should first wait for confirmed bullish technical patterns to emerge.

At present, the only meaningful technical structure available is Bearish Imbalance 17. Liquidity has already been taken around the latest swing levels, while the fundamental case for further US dollar appreciation remains questionable. Therefore, I continue to expect a bullish recovery, but it is important to wait for at least some technical confirmation of this scenario. Alternatively, traders may wait for a new sell signal to emerge within Bearish Imbalance 17.