FX.co ★ EUR/USD Analysis and Forecast – June 2: Market Focus Remains on US-Iran Negotiations

EUR/USD fell below the 50.0% Fibonacci retracement level at 1.1630 on Monday. However, bulls quickly regained control and managed to close above this level on Tuesday. As a result, the upward move may continue today toward the 38.2% Fibonacci retracement level at 1.1682, provided that the geopolitical backdrop does not shift once again. A rebound from the 1.1682 level would favor the US dollar and trigger a new decline toward 1.1630.

The wave structure on the hourly chart remains relatively straightforward. The latest completed upward wave broke above the previous peak, while the latest downward wave failed to break below the previous low. Therefore, the trend has shifted to bullish. Bulls will be able to extend the advance only if Iran and the United States reach an interim agreement, cease violating the terms of the ceasefire, and the Strait of Hormuz is reopened in the near future.

Monday's news flow was remarkable. All economic reports favored the bears, and geopolitical developments also supported the US dollar. Iran announced yesterday that it was withdrawing from negotiations with the United States after Israel resumed attacks on Lebanon, as a ceasefire in Lebanon had been one of the conditions for peace talks. Following this news, bears immediately regained confidence and stepped up selling pressure.

However, the situation changed quickly. Early this morning, Donald Trump reported that he had held overnight talks with Israeli Prime Minister Benjamin Netanyahu and persuaded Israel not to deploy any forces to Beirut. Yesterday, traders rushed to buy the US dollar; today, they are rushing to sell it. The geopolitical backdrop is now changing not only daily but several times a day.

Economic data released yesterday provided clearer signals, although it is doubtful that the market paid much attention to them. The US Manufacturing PMI came in at 54 points versus market expectations of 53, while the Eurozone unemployment rate failed to decline to 6.2% as traders had anticipated. Therefore, the economic backdrop supported the US dollar yesterday, but it was not the primary reason behind the pair's decline.

On the 4-hour chart, the pair continues to trade between the 23.6% Fibonacci retracement level at 1.1569 and the 38.2% retracement level at 1.1667. Market participants remain cautious about opening new positions and drawing conclusions. Under current conditions, I recommend placing greater emphasis on the hourly chart, as price movements have remained relatively limited in recent weeks. No emerging divergences are currently observed on any indicator.

Commitments of Traders (COT) Report:

During the latest reporting week, institutional traders closed 10,196 Long positions and 6,109 Short positions. Over seven weeks in February and March, the bulls' overwhelming advantage disappeared due to the conflict involving Iran. Over the past nine weeks, the situation has gradually stabilized amid a pause in hostilities in the Middle East. The total number of Long positions held by speculators currently stands at 223,000, compared with 193,000 Short positions. The gap is once again widening in favor of the euro.

From a longer-term perspective, major market participants continue to show strong interest in the euro. Naturally, global developments of various kinds—which have been abundant in recent years—continue to influence investor sentiment. In particular, market attention remains focused on the Middle East, where the conflict has been paused rather than fully resolved. As a result, the performance of the euro and the US dollar in the near term will depend less on Federal Reserve or ECB monetary policy and economic data, and more on developments in Iran.

Economic Calendar for the United States and the Eurozone:

• Eurozone – Consumer Price Index (09:00 UTC).
• United States – JOLTS Job Openings (14:00 UTC).

The economic calendar for June 2 includes two events that can both be considered noteworthy. Economic data may influence market sentiment on Tuesday, although the impact is unlikely to be substantial.

EUR/USD Forecast and Trading Tips:

Short positions could be considered following a rebound from the 1.1682 level on the hourly chart, with targets at 1.1630 and 1.1578. The first target has already been reached. New short positions may be considered on another rejection from 1.1682. Long positions could be opened following a close above 1.1630, with targets at 1.1682 and 1.1745. These positions may still be held today.

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.