Bullish Impulse Poised for Reactivation Following Trendline Support Test

Economic

Central Bank

Summary:

This specific price zone carried immense technical weight, as it intersected directly with the primary ascending trendline that has guided the pair's broader upward trajectory since March 13.

BUY EURUSD

EXP

TRADING

1.16190

Entry Price

1.17050

1.15400

1.16132 -0.00035 -0.03%

0.0

Pips

Flat

1.15400

Exit Price

1.16190

Entry Price

1.17050

According to a draft framework circulated by the Iranian news agency ILNA, a potential diplomatic breakthrough between Washington and Tehran outlines an immediate and comprehensive ceasefire across all active fronts, underscored by a mutual commitment to cease hostilities against strategic infrastructure. The document further guarantees uninhibited freedom of navigation through the critical corridors of the Persian Gulf and the Strait of Hormuz, alongside the systematic lifting of U.S. economic sanctions against Iran. Additionally, both nations are expected to initiate formal bilateral negotiations to resolve outstanding structural issues within a mandatory seven-day window. This development follows a period of heightened volatility during which reports circulated suggesting that Iran’s Supreme Leader had ordered a ban on exporting enriched uranium abroad—a claim that was subsequently refuted by Al Jazeera, which clarified that no such executive directive had been issued.

In the United States, high-frequency economic indicators continue to reinforce a backdrop of macroeconomic resilience. Initial jobless claims for the week ending May 16 compressed to 209,000 against the prior week's print of 212,000, arriving slightly below the median market consensus of 210,000. Simultaneously, S&P Global’s manufacturing metrics delivered a notable upside surprise, with the preliminary Manufacturing PMI ascending from 54.5 in April to 55.3 in May, marking its highest operational threshold in four years. This rapid acceleration was heavily driven by domestic firms aggressively accumulating inventories as a precautionary buffer against potential supply chain bottlenecks and burgeoning input costs. This data arrives directly on the heels of the Federal Reserve's latest meeting minutes, which revealed a deeply divided monetary policy committee. While a baseline majority favored maintaining the federal funds rate at current restrictive levels, a hawkish contingent explicitly raised the possibility of further rate hikes should the Middle Eastern crisis trigger structural shocks to global energy supplies.

Lending a voice to this internal debate, Richmond Fed President Thomas Barkin expressed heightened vigilance regarding the risks embedded on both sides of the central bank's dual mandate, adopting a strictly neutral posture while asserting that current monetary policy remains exceptionally well-positioned to absorb ongoing exogenous shocks. Conversely, Chicago Fed President Austan Goolsbee adopted a distinctly more hawkish rhetorical tone during an interview with WBEZ Chicago, reiterating that his primary focus remains anchored on sticky retail prices. Goolsbee cautioned that while the domestic economy had previously achieved meaningful milestones in its disinflationary trajectory, that progress has perceptibly stalled in recent months.

Across the Atlantic, elevated energy expenditures continue to pose an asymmetric downside threat to the Eurozone economic outlook, particularly given the region's acute structural dependence on fossil fuel imports. Market participants increasingly fear that a prolonged environment of high crude oil prices will ultimately stifle aggregate economic growth while simultaneously narrowing the European Central Bank’s (ECB) operational runway to implement further aggressive rate hikes if inflation expectations unanchor. This divergence was starkly illustrated in the latest flash Purchasing Managers' Index (PMI) data across both regions. While the U.S. Composite PMI held steady at 51.7 and its Services component moderated slightly to 50.9, the manufacturing sector's surge to 55.3 represented a robust 48-month high.

In sharp contrast, the Eurozone's private sector witnessed a deepening contraction, with the Composite PMI dropping from 48.8 to 47.5 in May, marking a severe 31-month low. This systemic erosion was broad-based; the Eurozone Services PMI plunged from 47.6 to a 63-month low of 46.4, while the Manufacturing PMI retreated from 52.2 to a three-month low of 51.4, reinforcing concerns that the single-currency bloc is facing a persistent period of stagflationary economic drag. Bullish Impulse Poised for Reactivation Following Trendline Support Test_1

Bullish Impulse Poised for Reactivation Following Trendline Support Test_1

Technical Analysis

From a technical perspective, EUR/USD has established a robust structural floor upon mitigating the 1.1576 support handle. This specific price zone carried immense technical weight, as it intersected directly with the primary ascending trendline that has guided the pair's broader upward trajectory since March 13. The immediate and aggressive bullish rejection observed upon testing this baseline suggests that the market has successfully absorbed local supply, paving the way for a forceful corrective impulse back toward the 1.1708 region. This primary upside objective possesses immense technical confluence, as it aligns in ultra-close proximity with both the 100 and 200-period Moving Averages, tracking at 1.1674 and 1.1708, respectively. Furthermore, because the 200-period MA perfectly blankets the 0.618 Fibonacci retracement level of the most recent downward leg, the probability of this zone acting as a primary structural target for the buyers is significantly amplified.

Our analysis of momentum oscillators further reinforces this constructive, bottoming technical profile. During the absolute low of the recent pullback on May 17, the Relative Strength Index (RSI) compressed deeply to the 20 level, registering severely oversold market conditions and alerting institutional buyers to an overextended sell-side environment. The index has since recovered steadily to print at the 45 level, neutralizing the immediate downside threat while retaining substantial technical "runway" to facilitate an extended upward march.

Simultaneously, the MACD provides cross-verification of this shifting market physics, as it prints a nascent bullish histogram that appears poised to steadily gain structural depth in positive territory. With the signal lines currently trending with positive slope toward the zero threshold, a confirmed breakout above the neutral line, synchronized with an expanding green histogram, would deliver the final technical confirmation required to spark a high-velocity bullish expansion toward the upper target horizons.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1617

Target price: 1.1705

Stop loss: 1.1540

Validity: Jun 03, 2026 15:00:00

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Bullish Impulse Poised for Reactivation Following Trendline Support Test

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