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20.07.2026 07:50 PM
The EUR/USD pair remains within the local bearish impulse that began on April 17, while over the past three weeks the bulls have managed only to push the bears back slightly. Although the bulls have launched an attack, their advance has lacked conviction. In my view, the euro is currently much closer to another decline than to an extension of its modest recovery.
Monday began with another, albeit limited, decline in the pair. The latest liquidity sweep signals a high probability of further downside in EUR/USD. It is difficult to determine how strong or prolonged the next decline may be, but the bears have one clear reference point—the most recent swing low at 1.1325. Liquidity could also be swept below that low, giving the bulls a second opportunity to regain control.
As for the fundamental backdrop, I still see little justification for the bears' continued strength. Geopolitical developments have once again disappointed, but they are unlikely to be the decisive factor for traders, considering the market barely reacted to either the temporary ceasefire or the reopening of the Strait of Hormuz. Therefore, I believe the bears may still extract some additional gains from the market, but they will not be able to sustain the current move indefinitely without stronger fundamental support.
It is also worth recalling that the latest U.S. labor market data came in relatively weak, while the inflation report showed further moderation. Job creation has once again remained subdued. Over the past three months, the economy created approximately 100,000 fewer jobs than traders had expected. As a result, slowing labor market conditions and easing inflation require the Federal Open Market Committee (FOMC) to weigh any decision on further monetary policy tightening much more carefully. At present, the U.S. dollar can no longer rely solely on the Federal Reserve's policy outlook for support.
Geopolitical developments have moved into the background. Tehran and Washington have once again violated the terms of the ceasefire agreement reached on June 17, but this has not surprised market participants. Donald Trump revoked the authorization for Iranian oil exports, reinstated restrictions on Iranian shipping, while Iran once again closed the Strait of Hormuz and resumed attacks on vessels attempting to pass through it.
The market showed virtually no reaction when the conflict subsided, and therefore it is unlikely to respond strongly to its renewed escalation. We did not witness the anticipated decline in the U.S. dollar following the easing of geopolitical tensions, nor did we see the euro strengthen after the European Central Bank tightened monetary policy. The bears remain in control despite both the fundamental and geopolitical backdrop. Now that geopolitical tensions have escalated again, the bears have at least a formal justification for launching another round of selling. In my opinion, however, the market is pricing in geopolitical developments for the third time over—and even reacting to events that have yet to occur.
The current technical picture continues to indicate that the bearish impulse initiated on April 17 remains intact. Bearish Imbalance 17 has not yet been tested, while Imbalance 18 was invalidated following weak U.S. labor market data. No bullish patterns have formed, and none are likely to appear over the coming days while the market remains largely range-bound. Therefore, the bulls may continue their corrective advance toward Imbalance 17, but there is currently no clear technical basis for trading such a move.
It is also worth noting that liquidity has already been swept below the August 1 low from last year (marked by the red line on the chart), followed shortly afterward by a liquidity sweep above the July 2 high. As a result, the bears currently have even more technical reasons to remain active.
The economic calendar was empty on Monday, with no significant data releases from either the Eurozone or the United States.
The bulls still have numerous reasons to launch another advance in 2026, and the conflict in the Middle East has done little to reduce them. Structurally and fundamentally, Donald Trump's policies—which contributed to the sharp decline in the U.S. dollar last year—have not changed. At present, I see few meaningful long-term supportive factors for the dollar despite the FOMC's hawkish stance. Meanwhile, EUR/USD is approaching a series of well-defined lows and swing points where another liquidity sweep could occur, potentially signaling the end of the current bearish impulse.
Eurozone
Germany
On July 21, the economic calendar includes two releases, neither of which can be considered particularly significant. Therefore, the impact of macroeconomic data on market sentiment on Tuesday is expected to be limited or negligible.
In my opinion, the pair remains in the process of forming a broader bullish trend. Although the fundamental backdrop shifted sharply in favor of the bears four months ago, the long-term trend cannot yet be considered invalidated or complete. Therefore, the bulls may begin a new advance after liquidity has been swept below clearly defined lows. However, opening long positions at the current stage appears premature. Bullish technical patterns should emerge first.
At present, traders have only Bearish Imbalance 17 as a reference. Liquidity has already been swept around the latest swing points, while the fundamental justification for the U.S. dollar's strength remains questionable. Therefore, I continue to expect a bullish recovery, but it is important to receive clear technical confirmation before acting on this scenario. Alternatively, traders may wait for a fresh sell signal to emerge within Bearish Imbalance 17.
