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EUR/USD Weakness Builds as Fed Hike Risks Return to Markets

Channel: StoneX Published: 2026-05-20 09:14
StoneX

Michael Bro of StoneX argues EUR/USD remains technically bearish, with the pair failing at major resistance and now testing a key inflection/support zone; he also notes stronger U.S. inflation data is reviving Fed hike risk, which supports a firmer dollar.

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Detailed summary

This is a short market technical update on EUR/USD from Michael Bro, senior market analyst at StoneX. He frames the pair as still under pressure after failing at several higher-time-frame resistance levels, including the January high zone, the yearly open, and the 618 retracement area. The main near-term focus is the 1578–1598 zone, which he describes as a major inflection/support area where he expects either a pause or a bounce. On the monthly and weekly charts, he says EUR/USD turned lower from major resistance in January and has spent the last two months below the yearly open. He emphasizes that the rally last month failed at a confluence of technical levels, reinforcing a broader bearish bias. …

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Main takeaways

  1. EUR/USD is being treated as technically weak after repeated failures at multi-time-frame resistance.
  2. The key near-term zone is 1578–1598; he sees it as an inflection area, not necessarily a final bottom.
  3. A daily close below 1578 would open more downside toward roughly 1482–1497.
  4. Upside recovery would need to reclaim the 200-day / 52-week moving average area first, then the yearly open zone for a broader reversal.
  5. Stronger PPI data is feeding renewed Fed hike expectations and supporting the dollar backdrop.

Market read by horizon

Short term

Tactically bearish on EUR/USD unless the 1578–1598 support band holds; a daily break below 1578 would favor pressing shorts, while rebounds face layered resistance into the 1660s–1680s.

  • Watch the 1578–1598 support/inflection zone for either a bounce or a breakdown.
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  • A daily close below 1578 is the immediate bearish trigger he flags for continuation lower.
  • If short, he suggests tightening stops or reducing size into this support area.
Mid term

Over the next few weeks, the pair likely stays under pressure while it remains below the 200-day average; a genuine trend change would require reclaiming the yearly open zone and building a higher base above it.

  • Over the next several weeks, his base case remains bearish while EUR/USD stays below the 200-day moving average.
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  • Validation for a renewed down leg would come from repeated closes under 1578 and failure of rebounds to clear nearby resistance.
  • A more durable turn higher would require the pair to reclaim the yearly open / monthly open area around 1731–1745.
Long term

The broader regime still favors the dollar unless EUR/USD can reclaim higher-time-frame resistance and reverse the rate-differential story. If Fed hike pricing persists, the euro’s upside may remain structurally capped.

  • He frames the broader regime as one where EUR/USD is still capped by major higher-time-frame resistance and vulnerable to dollar strength.
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  • The structural implication is that the euro remains in a bearish-to-neutral phase unless it can reclaim the yearly open region and establish a higher low above it.
  • If the market continues to price Fed hikes, the dollar may keep a relative yield advantage that weighs on EUR/USD beyond this single trade setup.
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Key claims (7)

0:15
BEARISH FX technicals EUR/USD

EUR/USD turned lower from major monthly resistance in January and has been slipping back since.

He says the pair reversed at a major resistance zone in January and then fell back.

0:40
BEARISH FX technicals EUR/USD

The rally last month failed at a confluence of resistance including the 618 retracement and yearly-open-related levels.

He lists several technical levels that rejected the move higher.

1:40
MIXED risk management EUR/USD

The 1578–1598 area is a major inflection/support zone where shorts should consider reducing exposure or tightening stops.

He explicitly recommends position management around this zone.

Unlock 4 more claims See the full bullish, bearish, and counter-consensus argument map extracted from the transcript. Unlock all claims

Assets discussed (2)

EUR/USD
BEARISH fx

He says the technical outlook remains weighted to the downside below the 200-day moving average and needs a close above key resistance to invalidate the bearish view.

December Fed funds futures
BULLISH other

He notes futures are pricing nearly a 60% probability of a Fed hike this year, which he says is driving interest-rate expectations and supporting the dollar.

Speakers

SPEAKER Michael Bro

Where this transcript pushes against consensus

  • The case is heavily chart-driven; there is little fundamental discussion beyond the PPI/Fed repricing link.
  • The claim that PPI will necessarily flow through to consumer inflation is plausible but not proven in the transcript.
  • He gives precise levels and probabilities, but does not explain why the market should treat the 1578–1598 zone as a durable inflection beyond confluence of indicators.

Topics

EUR/USD technicalssupport and resistanceFed hike expectationsU.S. inflationdollar strengthmoving averageschart patternsrisk management

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