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The EUR/USD currency pair opened with a minor gap higher, but the low of the price action since the week’s open could be a new support level.
This ranging pattern that has dominated here for several days now could be about to change, as several assets are showing a gap higher or lower as the new week gets underway. This is very clearly driven by the change in risk sentiment which has been triggered by President Trump’s announcement that a deal with Iran, or at the framework to conclude a deal, has been verbally agreed.
This change in risk sentiment and gapping price action has made the Forex market more interesting now, as the general directionless trading of most currencies, notably a year-long consolidation pattern by the US Dollar Index, may be starting to change into more widespread directional movement, making the Forex market more easily profitable for retail traders.
The Forex market tends to be driven by the US Dollar, which accounts for about 80% of all global foreign currency exchange. When the US Dollar starts to show a clearer trend, that is the time to sit up and take notice. We are still a long way away from that, but if the Iran issue stops affecting markets, it is time to watch carefully to see what happens.
EUR/USD Technical Analysis
The price gapped higher over the weekend. The gap higher was not very large or strong, but it was there in many assets for reasons already mentioned. It is a cliché that gaps in Forex tend to get filled, but this has a grain of truth. What is interesting is that at the time of writing, there seems to be a solid support level at $1.1629 which is maintain the gap. This is a bullish sign, and a clear sign that sentiment has turned against the US Dollar as it has become more risk-on.
The price action above that support level does not look especially bullish, but that could be deceptive. What should concern bulls is that we can see another potential resistance level which is confluent with the half-number at $1.1650 which seems to have halted the initial move higher.
No analysis today would be complete without mentioning it is a public holiday in countries which typically make a lot of exchange between the USD and the Euro – the USA, Germany, the UK, and France are all off. Markets still trade and the FX market is alive and working, but volatility tends to be lower on days like today.
Overall, the technical indications are that key levels will be respected, that volatility will be relatively low, and that a minor bullish bias could be the way to go.
(image25052026eurusd)
What if the Deal is Called Into Greater Doubt?
As I am typing this, Iran has just released a statement that despite agreement on many issues, the conclusion of a deal is not imminent. It is important to remember that nothing has been formally agreed yet, there are just emerging understandings between the USA and Iran. It is entirely possible, even if unlikely, that the emerging deal could blow up and instead we might get a resumption of the war with energy facilities being successfully targeted on both sides. That is extremely unlikely to happen today, but it remains possible that statements could be issued today which will lower the market’s belief that a deal to formally end the war and reopen the Strait of Hormuz is close, and that would almost certainly affect what happens in the financial markets.
Could the Support at $1.1629 Break Down?
Although I see the best potential opportunity which will be likely to set up today as a long trade, likely a scalp due to probable low volatility, from the support level at $1.1629, it could be that this level soon breaks down and the price action just sinks back into the area where it has spent most of the last week or so, and just trades sideways without presenting any real opportunity for traders.
A further possibility could be that the price rises to reach $1.1650 and then makes a strong bearish reversal which falls through the support at $1.1629, which would make a short trade the major opportunity of today here.
My Take on EUR/USD
The thing to watch here today is likely going to be how the price reacts when it next touches $1.1629 or $1.1650. Either of these will probably be today’s pivotal point. If it gets established below $1.1629, I think it will make sense to give up on this pair for the day. There may well be more life in currencies such as the Australian Dollar and Japanese Yen which are not affected by public holidays, and which are more strongly affected by changes in risk sentiment.
Review, Support & Resistance Levels
In my previous EUR/USD analysis on 13th May, I thought that the EUR/USD currency pair was likely to find a pivotal area between $1.1725 and $1.1691, which was a great call as the high of the day was within this area preceding a decisive move lower.
Risk 0.75%.
Trades must be taken before 5pm London time.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1649, $1.1666, or $1.1672.
Put the stop loss 1 pip above the local swing high.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1629 or $1.1588.
Put the stop loss 1 pip below the local swing low.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the US Dollar. It is a public holiday today in both France and Germany and in the USA.
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