Hot US inflation and geopolitical jitters weigh heavily on EURUSD

On Wednesday morning, the EURUSD pair is trying to claw its way up, hovering near 1.1735 after repeatedly failing to secure a foothold above 1.18 in recent days. So, what is the euro's biggest headache? The US Consumer Price Index (CPI), which has soared to levels not seen since May 2023—a development that has completely dashed any market hopes for a Federal Reserve (Fed) interest rate cut in 2026. This, in turn, has triggered a fresh wave of capital flowing into the dollar.

The greenback gets an extra tailwind from simmering tensions in the Middle East. News that the ceasefire is on shaky ground has pushed Brent crude back up. In times like these, the dollar plays its classic safe‑haven role, while the single currency finds itself squeezed by both rising energy costs and the European Central Bank's struggle to tame inflation. 

At first blush, ECB monetary tightening—with over 90% odds of a move in June and three rate hikes in total by year‑end—might seem euro‑positive. But in truth, they only highlight the region's deepening stagflationary troubles. The real economy is sending distress signals: Germany's ZEW current conditions index has dropped, Italian industrial production contracted in the first quarter (Q1), and eurozone GDP forecasts have been revised lower. Overall, the bigger picture points to more weakness ahead for the single currency. 

Turning to the charts, the technical picture only darkens the mood. The pair is now testing an ascending trendline sitting at 1.1716, which is likely to hit 1.17565 by May 20. To keep the medium‑term uptrend alive, the euro needs to consolidate above these levels. However, the Chaikin Oscillator stays in negative territory and has flatlined—a clear sign that buying momentum is evaporating. With bulls being unable to punch through the 1.18 resistance and appetite for the bloc's currency fading, the risk of another downtrend grows by the day.

For those ready to make a move, the trading plan below lays it all out:

Sell EURUSD at the current price. Place Take profit at 1.16850. Set Stop loss at 1.17750.

This forecast is valid from May 13 till May 20, 2026.