Although many traders have lost faith and dumped euros to build short positions, EUR/USD remains in a solid uptrend that was refreshed by the modest correction during the Middle East conflict.

Without the drag from the previously huge long positioning - which helped prevent EUR/USD from sustaining a rally above 1.20 - there is a stronger case for the uptrend to extend beyond 1.2084.

The correction that led traders to unwind a $27 billion bullish wager, the second largest on record, was small. The drop from 1.2084 to 1.1409 fell short of the 38.2% retracement of the rise from 1.0125 in February 2025 to 1.2084 in January 2026, which sits at 1.1336.

The major EUR/USD advance unfolded amid an unresolved trade war, while the smaller pullback stemmed from the Middle East conflict and has been largely reversed by the rebound to 1.1823 during a ceasefire. While the conflict is likely the key driver for traders at the moment, many have already positioned for it by going short. An escalation could deliver the decline they anticipate, but they are betting against a trend that is not only intact but also refreshed by a corrective move that may set the stage for further gains.

Absent an escalation, the EUR/USD uptrend is likely to continue and if there is peace, the pair could rise rapidly.
EURUSD and betting


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)