On Thursday, EUR/USD declined almost to the 61.8% Fibonacci retracement level at 1.1578 before staging a sharp reversal in favor of the euro and posting an equally strong rally, consolidating above the 50.0% Fibonacci retracement level at 1.1630. As a result, the upward move may continue today toward the 38.2% Fibonacci level at 1.1682. However, geopolitical developments continue to push traders from one direction to the other.

The wave structure on the hourly chart remains straightforward. The latest completed upward wave failed to break the previous high, while the latest downward wave failed to break the previous low. Therefore, the bearish trend remains intact. The temporary ceasefire between Iran and the United States supported the bulls for an entire month, but that was followed by a period of fading hopes for a lasting peace. Bulls will only be able to launch a sustained advance if Iran and the United States sign an interim agreement and stop violating the terms of the ceasefire.

The market remained highly volatile on Thursday due to new geopolitical developments. Overnight, it became known that Iran and the United States had once again violated the terms of the ceasefire, while Donald Trump threatened strikes against Oman if it were to form a coalition with Iran aimed at controlling the Strait of Hormuz. These developments were clearly escalationary in nature, which supported demand for the U.S. dollar during the first half of the day.

However, during the second half of the day, Axios once again reported insider information suggesting that Tehran and Washington had nevertheless reached preliminary agreements to extend the ceasefire for another 60 days and had made sufficient progress toward signing a memorandum of understanding. As a result, it was the bears who retreated during the second half of the session.

The market continues to swing between these opposing narratives on a daily basis. At best, it simply ignores incoming and unverified information; at worst, as seen yesterday, it first plunges and then rallies sharply. Another exchange of fire could occur in the Middle East today, which would likely boost demand for the dollar again. By evening, Donald Trump may announce that an agreement with Iran is "just minutes away from being signed," and bulls would once again take control of the market.

On the 4-hour chart, the pair continues to trade between the 23.6% Fibonacci retracement level at 1.1569 and the 38.2% Fibonacci retracement level at 1.1667. Market participants are in no hurry to open new positions or draw firm conclusions. At the current stage, I recommend focusing primarily on the hourly chart, as price movements have remained relatively subdued in recent weeks. No emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

During the latest reporting week, professional traders opened 9,249 Long positions and 15,936 Short positions. Over the course of seven weeks in February and March, the bulls' overwhelming advantage disappeared due to the conflict in Iran, while over the past eight weeks the situation has become more balanced amid the suspension of hostilities in the Middle East.

The total number of Long positions held by speculators currently stands at 233,000, while the number of Short positions amounts to 199,000. The gap is once again widening in favor of the euro.

Overall, from a long-term perspective, major market participants continue to view the euro more favorably. Naturally, global developments of various kinds—which have been plentiful in recent years—continue to influence investor sentiment. At present, the market's attention remains focused on the Middle East, where the conflict has merely been paused rather than resolved.

Therefore, in the near future, the euro and the U.S. dollar are likely to be driven not by Federal Reserve or ECB monetary policy, nor by economic data, but by developments in Iran.

News Calendar for the United States and the Eurozone:

• Germany – Unemployment Rate (07:55 UTC).
• Germany – Consumer Price Index (12:00 UTC).

The economic calendar for May 29 contains two scheduled releases, neither of which can be considered particularly important. Therefore, the impact of the economic backdrop on market sentiment may be limited during the first half of Friday's trading session.

EUR/USD Forecast and Trading Recommendations:

Short positions may be considered if the pair closes below the 1.1630 level on the hourly chart, with a target at 1.1578. Long positions could be opened following a close above 1.1630, with targets at 1.1682 and 1.1745. These positions may remain open today; however, without geopolitical support, bulls may struggle to continue the advance.

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.