Buyers of EUR/USD started the trading week vigorously, testing the resistance level at 1.1450 (the upper line of the Bollinger Bands indicator on the daily chart) and updating a six-week high at 1.1455. However, the changed fundamental backdrop did not allow the bulls to consolidate above the 1.1400 target. Although the pair's decline is uncertain, it remains true: another attempt to break into the 1.14 zone has failed.

Among the main reasons for the downward pullback were rumors of an upcoming phone call between Trump and Xi Jinping and the eurozone CPI report, which reflected a slowdown in inflation. The dollar revived, and the euro came under background pressure despite the outcome of the European Central Bank's June meeting (scheduled for Thursday) already being priced in before Tuesday's release.

Regarding the rumors of the call between the U.S. and Chinese leaders — it's not exactly a rumor but not a confirmed fact either. According to White House Press Secretary Karoline Leavitt, the U.S. President and the Chinese leader are "likely" to have a phone conversation "sometime this week." While the source is official, the statement doesn't guarantee the call will happen. Previous similar announcements (for instance, after the Geneva meeting in May) have not materialized into actual calls.

Moreover, some analysts surveyed by Bloomberg suggest that a conversation between the two leaders is unlikely to change Trump's overall course, as containing China is a cornerstone of his foreign policy. Thus, even if the call takes place, it may temporarily boost negotiations but isn't expected to bring major breakthroughs. Recall that during Trump's first presidency, he met with Xi Jinping three times during a year-and-a-half-long negotiation process, but real progress was only achieved in December 2019.

In other words, the optimism displayed by dollar bulls seems excessive and, at the very least, premature.

Let's not forget the stalled trade negotiations between the U.S. and the EU. Trump's threats to impose 50% tariffs on all European goods have not led to a "quick deal." According to Bloomberg, Brussels has warned that if the U.S. imposes these tariffs on steel and aluminum starting June 4, the EU will retaliate with tariffs already approved for €21 billion and an additional list for €95 billion if talks collapse.

This suggests that the "negotiation track" currently supporting the greenback is an unreliable ally. Thus, the ongoing bearish trend in EUR/USD should be viewed with skepticism.

The eurozone CPI report also fueled the euro's weakness on Tuesday. All components of the release came in "red," indicating a slowdown in inflation. The overall Consumer Price Index fell to 1.9% year-over-year after two months at 2.2%. Analysts expected a drop to 2.0%, but the actual figure fell below the ECB's 2% target for the first time since September 2024.

The core CPI, excluding energy and food, also dropped sharply to 2.3% year over year—its lowest level since February 2022.

The report's structure shows that service price growth slowed to 3.2% in May (from 4.0% in April), energy prices fell by 3.6% (the same as April), food, alcohol, and tobacco prices fell by 3.3% (versus 3.0% previously), and industrial goods prices decreased by 0.6% (unchanged from April).

This outcome immediately affected the euro. However, bears should not expect this release to provide long-term support. The market has already priced in a 25 basis point rate cut by the ECB at the June meeting, and the latest report, despite its negative tone, won't change that.

As for future prospects — that's still an open question. Last week, ECB's Fabio Panetta stated that the ECB's ability to cut rates further is "limited," suggesting a pragmatic and flexible approach going forward. Despite the CPI slowdown, the ECB will likely deliver similar messages at the June meeting. Thus, the CPI release won't be a strong ally for EUR/USD sellers and will only have a short-term effect.

This indicates that short positions are still risky, even with today's bearish trend. Bears haven't even tested the intermediate support level at 1.1330 (Tenkan-sen line on D1), let alone the stronger support at 1.1280 (the middle Bollinger Bands line, coinciding with the top of the Ichimoku Kumo cloud on D1). The price is between the middle and upper lines of the Bollinger Bands on the daily chart and remains above all Ichimoku indicator lines.

I believe the current price pullback should be used to open long positions targeting 1.1400 and 1.1450 (the upper Bollinger Bands line on the daily timeframe).