Buyers of the euro failed to achieve a decisive breakthrough into the 1.16 area. After touching 1.1622, the pair first retraced to the base of the figure and then returned to the 1.1510–1.1590 range in which it traded throughout last week. Initial optimism over agreement on a framework memorandum between the United States and Iran has been replaced by caution as market participants began to doubt the durability of the accords reached. In addition, apparent (or rather persistent) divergences between Washington and Tehran forced EUR/USD buyers to take profits, and the pair's northward impulse has gradually faded.

But does the current environment justify entering short? Or do longs remain the priority? That is, as they say, a question with an asterisk.

Briefly, the United States and Iran on Sunday evening said they had agreed a framework memorandum providing for cessation of hostilities and gradual normalization of the situation around the Strait of Hormuz. The formal signing of the memorandum is expected to take place in Switzerland later this week—provisionally on Friday, 19 June.

Against such headlines, interest in risk assets, including the euro, increased on currency markets. But as market participants began to appraise the situation in more detail, initial optimism gave way to growing wariness.

The text of the agreement has not been published officially; however, according to incoming leaks, Washington and Tehran may have different views on its content and implementation. Iranian sources report the agreed memorandum is two-staged: the first stage envisages cessation of hostilities, reopening of the Strait of Hormuz, and easing of some sanctions; the second stage envisages talks on the nuclear program and other most difficult, fundamental issues.

It is this two-step structure that worries traders. The main concern is that the most complex issues have been deferred for later. At the same time statements from US and Iranian representatives are vague and sometimes contradictory. Parameters of the agreement are outlined only in limited form, and the timetable for implementing key provisions remains unclear. One should also take into account the risk of domestic political resistance in Iran and among regional US allies, above all Israel, which has already stated it is not a party to the deal.

Moreover, today there is information that shippers will not resume transits through the Strait of Hormuz for several weeks until they are assured of the deal's reliability. The head of the world's largest tanker operator, Mitsui O.S.K. Lines, said restoration of shipping could take several weeks to several months because there have already been several false starts in reopening the waterway. According to the Financial Times, about 500 vessels remain stuck in the Persian Gulf waiting to depart.

In other words, market participants are not rushing to uncork the champagne, continuing to weigh the risks of agreement failure and a protracted restoration of shipping through the Strait of Hormuz.

But does that mean short positions in EUR/USD are currently the priority? In my view—no. The current fundamental picture does not support a sustainable strengthening of the dollar.

First, neither the United States nor Iran wants to resume full-scale hostilities. Donald Trump is acting with an eye on the forthcoming US midterm congressional elections, where an escalation of foreign policy risks could produce political costs, while the Iranian economy is suffering mounting pressure from restricted shipping and effectively blocked port logistics. In this context it is notable that the Islamic Revolutionary Guard Corps (the most prominent hawkish faction) cancelled a large missile strike on Israel scheduled for Sunday night after the IDF strike on Beirut. That suggests Tehran is inclined in current conditions to consolidate the agreements reached rather than to escalate further.

In addition, some analysts believe the structure of the agreed deal appears viable and is built on the "first deeds, then talks" principle. That primarily concerns the fate of the Strait of Hormuz and the restoration of shipping in the region. One should also not forget that the leaders of the United Kingdom, Germany, France, and Italy have signaled willingness to consider lifting sanctions on Iran if Tehran fulfills the conditions of the deal. Put another way, the scale of potential incentives in the form of sanctions relief and economic normalization significantly outweighs the possible costs of renewed escalation.

All this suggests EUR/USD retains upside potential despite lingering doubts and prevailing skepticism. Therefore, southbound pullbacks are appropriate to use as opportunities for opening long positions with the first and, for now, only target at 1.1630—at that price, the lower edge of the Ichimoku Kumo cloud on the D1 timeframe coincides with the upper Bollinger band line on H4.