The euro/dollar pair began the new trading week with a modest southward retracement, stepping back from Friday's high of 1.1687. The downward impulse, however, faded quickly, and the pair has since drifted around the middle of the 1.16 area.

Both buyers and sellers remain cautious amid ongoing US-Iran negotiations. On the one hand, negotiators have not managed to reach a deal despite a stream of encouraging leaks; on the other hand, President Donald Trump continues to express optimism about the diplomatic process. Today he said that Iran really wants a deal.

The geopolitical factor remains the key driver for EUR/USD. If the situation stays suspended, the price will most likely continue to oscillate in the 1.1610–1.1680 range. A diplomatic breakthrough would sharply lift demand for risk assets and allow buyers to secure a position in the 1.17 area. If negotiations stall and the United States resumes military action, the pair would likely test support at 1.1560 (the lower Bollinger band line on the D1 timeframe).

At present, an escalation scenario appears the least likely outcome. The market consensus is that the parties will sooner or later agree on a compromise that will end the conflict and restore shipping through the Strait of Hormuz. Traders are therefore effectively discounting negative headlines and maintaining a cautiously constructive stance that provides background support to EUR/USD.

Macro releases have moved to the background — but that is only until further notice. The June Federal Reserve meeting (under Chair Kevin Warsh) takes place in two weeks, and if Washington and Tehran do finalize a memorandum of understanding that paves the way to a full settlement, market attention will quickly refocus on key macro data. Accordingly, upcoming releases should not be ignored; their influence is likely to be felt in the near term.

During the US trading session on Monday, the manufacturing ISM index for May will be released. That is the first heavyweight indicator of the week because it captures new orders, employment, and price dynamics in manufacturing. Since the start of this year, the ISM has remained in expansionary territory above the 50-point dividing line (52.6 in January, 52.4 in February, and 52.7 in March and April), hovering near the highest readings since 2024. That performance has been supported by resilient domestic demand (the new orders subindex has consistently held above 53–54), rising investment in technology and infrastructure (inflows to defense, data centers, and AI), and supply chain disruptions that have encouraged US firms to shift orders domestically.

Most analysts forecast the ISM manufacturing index to print another multi-month high for May, at around 53.3. Even a print at consensus would provide meaningful support to the dollar.

On Tuesday, the JOLTS report will be published; it is seen as a gauge of labor market heat. The consensus calls for a moderate decline in job openings to 6.79 million from 6.86 million in March. For the Fed, the key combination is "openings + hires + separations": if openings fall quickly while hires remain weak, the dollar will come under pressure as doves gain influence. If JOLTS shows a moderate decline in openings accompanied by low separations, the dollar should remain resilient despite the headline softening.

Also, on Tuesday, preliminary euro area inflation figures for May will be released. Consensus expects the headline CPI to rise to 3.4% year-on-year from 3.0% in the prior month, while core inflation is expected to stay broadly stable at about 2.3% year-on-year after dipping to 2.2% in April. A "green zone" release would increase talk of an ECB rate hike in June. At the same time, the ECB is constrained by weakening growth, so any upside surprise would most likely prompt only a short-lived euro rally before markets revert focus to US data, since the long-run monetary divergence still favors the dollar.

On Wednesday, the US ISM services index will be published. This release is critical for EUR/USD because the non-manufacturing sector accounts for over 70% of the US economy and is a direct reflection of domestic demand resilience. The services ISM has remained in expansion since June last year but has shown a downtrend over the past two months, slipping to 53.6 in April. Most forecasters expect the services ISM to tick up to 53.8 in May. Traders will focus on structural elements of the report, notably new orders and employment; their resilience would be interpreted as support for continued firm Fed rhetoric. The prices paid subindex—which surged to a four-year high of 70.7 in April—could trigger elevated volatility if it shows further acceleration.

Also, on Wednesday, the ADP report will be released. It is an important lead indicator ahead of Friday's nonfarm payrolls, even though correlation is imperfect. Consensus expects private payrolls to rise by about 116,000, a pace consistent with the Fed's narrative of a "stable but not overheated" labor market. The ADP print will only dent the dollar materially if it misses well below 100,000.

Finally, on Friday, the US nonfarm payrolls (NFP) for May will be published — arguably the most important release of the week for EUR/USD traders. The consensus forecast calls for an increase of only 95,000 jobs in nonfarm payrolls with the unemployment rate unchanged at 4.3 percent. Such a low headline would be a trigger for higher volatility in EUR/USD. If NFP prints at or below expectations, confirming US labor market softness, the dollar would be under significant pressure and the pair would gain. Conversely, any material upside surprise (120,000 and above) would strongly support the dollar because market expectations are subdued.

From a technical perspective, on the D1 timeframe, EUR/USD trades inside the Ichimoku Kumo cloud, between the middle and lower Bollinger band lines and between Tenkan-sen and Kijun-sen. All that points to persistent uncertainty. The pair will likely continue to probe the boundaries of the working range 1.1610–1.1680 (the lower and upper Bollinger lines on the H4 chart) until clarity emerges on the US-Iran talks. In the meantime, traders will probably play the macro releases listed above within the stated price corridor.