EUR/USD Technical Analysis: Bearish Impulse Persists Amid Uncertainty

Market Overview and Monetary Policy Context

The EUR/USD pair remains locked within a local bearish impulse, despite minor gains over the past two weeks. Recent commentary from Kevin Warsh at the international economic forum highlighted the necessity of reducing inflation, yet provided no clarity on whether the Federal Reserve will rely on further monetary tightening or anticipate a natural decline in energy prices.

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With no clear guidance from the Fed, market focus remains centered on incoming inflation data. Meanwhile, US labor market data suggests potential weakness, with job creation falling approximately 100,000 below expectations over the last quarter. This labor market deceleration could force the Federal Open Market Committee to exercise caution regarding additional interest rate hikes.

Technical Structure and Price Action

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The euro has experienced a modest recovery, sufficient to invalidate the bearish Imbalance No. 18. However, the pair has struggled to gain upward momentum, failing to advance even 100 points in the last fortnight. As long as the bearish Imbalance No. 17 remains intact, the broader downward trend initiated on April 17 is technically preserved.

The market has entered a period of consolidation, with neither geopolitical tensions nor monetary policy rhetoric driving significant directional movement. Although liquidity was swept below the August 1, 2025, low, there are currently no reliable bullish technical patterns to signal a reversal. Traders are effectively pricing in developments ahead of their actual occurrence, maintaining the bearish outlook.

Fundamental Outlook and Trading Strategy

Fundamental drivers for the US dollar remain ambiguous despite the FOMC's hawkish tone. While Germany's annual inflation rate confirmed a slowdown to 2.4%, broader structural concerns regarding US policies persist. The current technical landscape suggests that while a long-term bullish trend remains possible, the immediate structure is dominated by the ongoing bearish impulse.

Opening long positions at current levels is not advised due to the lack of confirming technical setups. Market participants should monitor the proximity of significant swing points for potential liquidity sweeps. A prudent approach involves waiting for either a bullish reversal pattern or a fresh sell signal within the bounds of Imbalance No. 17 before committing capital.

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