On Thursday, the EUR/USD pair retraced back to the support zone of 1.1260–1.1282, reversed in favor of the euro, and resumed its upward movement toward the yet-to-be-tested resistance zone at 1.1374–1.1380. A rejection from this resistance zone would favor the U.S. dollar and a pullback toward the 1.1260–1.1282 zone. A breakout above 1.1374–1.1380 would increase the likelihood of further euro gains toward the next Fibonacci retracement level of 76.4% at 1.1454.

The wave structure on the hourly chart has shifted. The latest upward wave broke the previous high, while the last downward wave failed to break the previous low. This confirms a bullish trend. Although news of progress in U.S.–China negotiations and the Fed's hawkish stance briefly supported the bears, Donald Trump's policies are once again weighing heavily on the U.S. dollar.

Thursday's news background was unfavorable for the euro, which is why we saw a temporary retreat by the bulls. However, that pullback was short-lived, as the overall fundamental backdrop from the past 3–4 months remains more influential than any single set of PMI data. That said, deteriorating indicators in Germany and the broader eurozone couldn't go unnoticed. Germany's services PMI dropped from 49.0 to 47.2, and manufacturing PMI fell from 50.4 to 49.5. The eurozone services PMI fell from 50.1 to 48.9, while the manufacturing PMI rose slightly from 49.0 to 49.4—but still remained in contraction territory.

Nonetheless, bulls reclaimed much of Wednesday's modest losses during the overnight session. The bullish trend remains intact, while the dollar remains extremely weak due to the lack of positive developments in trade talks—particularly with the EU and China. As a result, both technical and fundamental conditions continue to favor bullish traders.

On the 4-hour chart, the pair reversed in favor of the euro and consolidated above the 100.0% Fibonacci level at 1.1213, signaling the continuation of the bullish trend—a view supported by the wave structure. The rally may extend toward the 127.2% Fibonacci retracement at 1.1495. A bearish divergence is forming on the CCI indicator, but it may only trigger—or may have already triggered—a modest price decline.

Commitments of Traders (COT) Report:

Over the latest reporting week, professional traders opened 15,357 long positions and 6,302 short positions. Sentiment among the "Non-commercial" group has long turned bullish—thanks in part to Donald Trump. Speculators now hold 209,000 long positions versus 124,000 short positions, with the gap continuing to widen. The euro remains in demand, while the dollar does not. The overall situation remains unchanged.

For fifteen consecutive weeks, large traders have been reducing their short positions and increasing their longs. While the ECB–Fed divergence in monetary policy still technically favors the U.S. dollar, Trump's political decisions carry more weight for market participants, as they raise the risk of a U.S. recession. As a result, dollar bulls are unwilling—or unable—to capitalize on Fed policy.

News Calendar for the U.S. and Eurozone (May 23):

• Germany – Q1 GDP change (06:00 UTC)

The calendar includes only one notable release. The news background is expected to have minimal influence on market sentiment for the rest of Friday.

EUR/USD Forecast and Trader Tips:

Selling the pair is possible today on a rejection from the 1.1374–1.1380 zone on the hourly chart, with targets at 1.1320 and 1.1260–1.1282. I previously recommended buying on a close above the 1.1260–1.1282 zone with targets at 1.1338 and 1.1374. Yesterday, the pair bounced from that very zone again, providing traders with renewed buying opportunities toward those same targets.

Fibonacci level grids are plotted from 1.1574–1.1066 on the hourly chart and from 1.1214–1.0179 on the 4-hour chart.