#TradFi交易分享挑战 Euro遭双杀！France Unemployment Surges to Five-Year High + Inflation Spirals Out of Control, Fed's Hawkish Return Drags Down Euro! EURUSD Next Week Outlook (May 18, 2026 – May 22, 2026)

Euro (EURUSD) Short-term Price Trend
Range Outlook: 1.1800-1.1600
This week, the euro's overall price movement was significantly suppressed. Against the backdrop of the US dollar index rebounding, euro bulls chose to reduce their exposure, causing the exchange rate to oscillate lower from 1.1787 to around 1.1620, hitting a low not seen since April 8. The Eurozone faces internal structural economic recovery challenges, while two consecutive days of unexpectedly high US inflation data have sharply shifted market expectations for Federal Reserve policy, both exerting core pressure on the euro.

France's unemployment rate unexpectedly rose to its highest level in five years, further indicating that this second-largest Eurozone economy was already weak at the outbreak of the Middle East conflict, reflecting the overall Eurozone economy. Data from the French National Institute of Statistics show that unemployment increased across all age groups, with the first quarter unemployment rate rising to 8.1%, the first time above 8% since 2021, whereas economists had expected a slight decline from 7.9% at the end of last year to 7.8%.
French Central Bank Governor François Villeroy de Galhau said on Wednesday: “The slight increase in unemployment reflects an economic slowdown.” He also emphasized the importance of “long-term progress in the French economy.” He pointed out: “During the last slowdown after 2012, France's unemployment rate was above 10%. Now it's around 8%. This is obviously not satisfactory news. But since 2010, France has added over 4 million net jobs.” French Budget Minister Damiens Aymard also stated in an interview that this data “reminds us that we must continue to push forward with this top priority.”
Despite the French government successfully managing the budget crisis in February and avoiding political turmoil again, the worsening employment data released on Wednesday still drew attention. Data released at the end of April already showed that due to weak trade and domestic demand, France's economy failed to grow in the first quarter, underperforming the economists’ average forecast of 0.2% growth and below the Bank of France's estimate of 0.3%.
Data shows that France's economy in Q1 was constrained by a 0.1% decline in consumer spending and a 0.7% drop in household investment; corporate investment also fell 0.2% after stagnating at the end of 2025. Exports plunged 3.8%, negatively impacting GDP by 0.7%, but inventory accumulation offset this drag, providing a 0.8% boost. Xavier de Belmont, Chief Economist at the Bank of France, said: “The resilience of the French economy is beginning to be tested.” “Since the start of this year, we have emphasized the remarkable resilience of the French economy. Now, we are seeing the first signs of impact.”
Some market analysts believe that the weak performance in Q1 has already dampened France’s 0.9% annual growth target, and the next three quarters will need to see sustained and stable growth to have a chance of reaching this goal.
Economists forecast that the blockade of the Strait of Hormuz could reduce France’s economic growth by 0.3 percentage points this year. A Tuesday survey of 8,500 companies by the Bank of France indicated that the Middle East war has begun to drag on economic activity and intensify inflation pressures. The survey showed that industrial and construction activity slowed in April and may decline this month. Service sector firms reported stagnation and expect contraction in May. Additionally, the proportion of companies raising prices is accelerating, with 13% of industrial firms reporting supply difficulties.
Data released on Wednesday also showed France’s April CPI final year-over-year increase at 2.2%, up from 1.7% in March; the harmonized CPI rose 2.5% YoY, the highest since July 2024, up from 2% in March. Analysts generally believe that the recent inflation rebound in France is mainly driven by sharp increases in international energy prices. In April, energy prices in France rose 14.2% YoY, significantly higher than the previous month, with notable increases in gasoline, diesel, and other fuels.
Beyond energy, service prices also pushed inflation higher, especially in transportation and accommodation. Food prices rose slightly slower, while tobacco and industrial products remained stable or declined slightly. The current slowdown in growth and inflation resurgence in France mirror the broader Eurozone situation, forcing the European Central Bank into an increasingly narrow policy corridor, balancing “rate hikes to curb inflation or rate cuts to stabilize growth.”
Eurozone inflation is worsening further. April inflation jumped to 3%, the fastest since fall 2023, up from 2.6% in March. Data shows energy prices in the Eurozone rose 10.9% YoY in April, up from 5.1% in March. Food and alcohol prices increased 2.5%, service prices 3.0%, and non-energy industrial goods 0.8%. A survey of economists conducted from May 4-7 indicates that, driven by higher energy prices due to the Middle East conflict, inflation in the Eurozone is expected to accelerate from 2.8% to 2.9%. The ECB’s own assessment has also sharply raised its 2026 inflation forecast from 1.9% to 2.6%.
Analysts expect inflation to fall back to the ECB’s 2% target only by 2028. Meanwhile, the Eurozone’s economic outlook remains bleak. Q1 GDP grew just 0.1%, below expectations. Forecasts for 2026 have been revised downward from 0.9% to 0.8%, with subsequent two-year growth projected at 1.3% and 1.5%. The European economy is currently affected by multiple adverse factors, such as US tariffs and weak external demand. Rising energy prices will impact Europe's manufacturing transformation, with energy-intensive industries under significant pressure. If the energy crisis persists, inflation could transmit across sectors, weakening growth momentum and leading to stagflation—high inflation with stagnant growth.
The ECB announced last month that its deposit rate remains at 2%, in line with market expectations. The ECB provided no forward guidance, reiterating that decisions will be made based on incoming data at each meeting. The ECB’s Governing Council stated: “The upside risks to inflation and downside risks to growth have increased. The Governing Council remains well-positioned to respond to the current uncertainties.”
ECB President Christine Lagarde said at the post-decision press conference that, although rate hikes are being discussed and will be reassessed at the June meeting, the current Eurozone economy should not be labeled stagflation, emphasizing that “it’s completely different from the 1970s.” She noted that the decision was made with still-incomplete information but that the committee unanimously agreed to keep rates steady and had a “thorough and comprehensive” discussion on possible hikes. She added that the next six weeks will be crucial for assessing the economy before making a more informed decision at the June meeting.
Economists expect the ECB to raise rates twice this year, in June and September, each by 25 basis points, aligning more closely with market expectations of at least two hikes this year.
Within the ECB, there are clear divisions on monetary policy outlook. Earlier this month, Slovak Central Bank Governor Peter Kazimir said that a rate hike at the June meeting is “highly likely.” He stated that, although no fixed path has been pre-committed and more data is needed to assess the impact of the Middle East conflict, “our stance remains firm.” In a column, he wrote: “Based on this, tightening monetary policy in June is almost unavoidable. We must prepare for persistent inflation and slowing growth in the Eurozone, and a June rate hike is becoming increasingly likely.”
German Bundesbank President Joachim Nagel also said this week that the impact of the Middle East conflict is increasing the likelihood of the ECB raising borrowing costs. Nagel stated: “I still hold some hope for a significant easing of tensions in the Middle East, but we cannot ignore high energy prices. Unless inflation dynamics change fundamentally, rate hikes are becoming more likely.” He warned: “We may still face considerable inflation pressures in the future.”
Nagel acknowledged that the weak Eurozone economy could influence next month’s decision. “When growth is under great pressure, no one likes to hike rates. But our duty is to maintain price stability. In the long run, if we clearly commit to tackling inflation and keep medium-term inflation around 2%, it benefits everyone. We will fulfill our responsibilities, with no excuses.”
However, some policymakers are more cautious. ECB Governing Council member and Lithuanian Central Bank Governor Gintaras Šimkus said: “Obviously, we are discussing a possible rate hike in June. But whether a decision will be made depends on the specific situation and data.” He added that if the Middle East conflict is resolved, “that could be a factor allowing us to consider other options.”
De Guindos, Vice President of the ECB, stated that if inflation spreads beyond oil prices, the ECB must remain cautious and be ready to act on rates. He also said that before any tightening, sufficient data on core inflation, wages, and expectations from businesses and consumers are needed. He emphasized that demand weakness and slowing growth could help ease inflation pressures.
Eurozone Vice President Luis de Guindos bluntly said upcoming economic data “will not look good.” He pointed out that the impact of energy shocks on inflation indicators is much faster than on growth indicators, and in the coming weeks, its drag on growth will become more apparent. De Guindos urged caution on rate decisions. He warned that even if a ceasefire is quickly reached, the conflict will leave “scars,” with some infrastructure destroyed and consumer confidence declining.
He warned: “Key indicators are already declining. Whatever causes energy prices to rise, their impact on confidence is sometimes underestimated.”
Overall, the ECB faces a complex policy environment. On one hand, Middle East tensions push up oil prices and increase inflation pressures in Europe. On the other, slowing growth and waning market confidence limit further rate hikes.
As the Middle East situation continues to escalate and energy prices stay high, discussions about the ECB’s future monetary policy are heating up. However, TD Securities’ latest view shows a cautious stance on the June policy outlook. Unlike some market expectations, TD Securities believes the ECB is more likely to keep rates steady in June rather than hike further.
They note that Europe’s economy still faces growth slowdown pressures, and concerns about a “second-round” inflation effect have not fully materialized. The “second-round effect” mainly refers to rising energy prices further pushing wages, services, and core consumer prices higher, creating long-term inflation pressures.
TD Securities believes that, currently, there are no clear signs of wages or core inflation spiraling out of control, so the ECB has no immediate need to hike rates.
They outline three possible scenarios before the June meeting:
1. Middle East tensions ease, energy prices fall, and Eurozone inflation pressures temporarily ease.
2. The situation remains deadlocked, oil prices stay high, but internal demand in Europe remains weak.
3. The Middle East escalates again, and inflation shows clear second-round effects, with wages and service prices rising rapidly.
TD Securities states that only the third scenario would truly prompt the ECB to reconsider rate hikes. Currently, the first two scenarios have combined probabilities above 50%. Therefore, they believe the ECB will likely keep rates unchanged in June and continue monitoring data, allowing the tight financial conditions to suppress inflation.
In fact, European financial conditions have already tightened significantly. Eurozone financing costs remain high, corporate loan demand declines, and the real estate market is under pressure from high interest rates. Meanwhile, fiscal pressures in some countries persist, and high rates are gradually increasing government debt financing costs.
On the US side, driven by Middle East conflict, energy prices surged sharply. April’s Producer Price Index (PPI) exceeded expectations, marking the largest increase in over three years, while the April CPI report also showed accelerated consumer inflation driven by soaring energy prices.
Two consecutive days of unexpectedly high inflation data have sharply shifted market expectations for Fed policy. The Fed is now more likely to remove dovish language from policy statements and reiterate a wait-and-see stance rather than immediately hike rates. However, she emphasized that the current inflation pressures have not yet fully transmitted to the broader economy, and risks remain. Previously, markets expected the Fed to stay on hold or even cut rates; after the latest data, markets are pricing in a possible rate hike, with the 2-year yield back above 4.00%, and about a 50% chance of one hike within 2026.
Technical indicators show that on the daily chart, EUR is exhibiting a typical oscillation along the lower Bollinger Band during Friday’s close, with the RSI falling below 55-45 into the weak/strong balance zone, indicating a bearish trend and relative weakness, while also suggesting a new “price calibration-reselection” window.
Although geopolitical easing offers some risk appetite support for the euro, the “double-line” risks embedded in the fundamentals could quickly alter macro expectations. If the RSI drops below 40, the short-term bearish sentiment could intensify further.
Meanwhile, the Bollinger Bands’ three-line moving averages are turning downward in sync, reflecting increasing bearish momentum. If the bands’ opening widens, it would further confirm short-term downside strength, validating a bearish market shift.
Additionally, while the MACD remains in bullish territory, its momentum has narrowed significantly. If the MACD tests below zero and enters a new volume-up phase, it could trigger a price decline driven by “stop-loss and bearish pricing.”
The upper Bollinger Band currently sits around 1.1790, serving as a dynamic short-term resistance. The middle band at approximately 1.1710 acts as a key dividing line for bullish/bearish forces. The lower band at about 1.1630 provides dynamic support. If the euro fails to reclaim the middle band, the risk of a decline below the lower band increases.

Overall, the technical indicators suggest a negative momentum, with market sentiment and price action in a defensive phase, consistent with “short-term high positioning and volatility-driven bearish dominance.” The fundamental risks could quickly shift the trend, but until key technical levels are broken, the structure favors mild retracements and rebounds. If the Bollinger middle band is repeatedly tested without volume and momentum confirming, the risk of a breakdown below the lower band grows.

On the daily chart, the current structure around 1.1800 forms a near-term static resistance zone. Bulls aiming for a new rally need to consolidate above 1.1800 and generate momentum and volume resonance to push higher, potentially testing 1.1920 for further bullish space.
However, until the euro can firmly stay above 1.1800, the dominant trading logic suggests caution against a potential pullback after reaching a temporary high.

From a risk perspective, on the daily chart, the core driver behind the euro’s recent strength remains external—Middle East geopolitical tensions and US-Iran negotiations. The ceasefire has lasted about a month, with Strait of Hormuz shipping mostly normal and no major incidents reported, boosting global risk sentiment. As tensions ease, the dollar’s safe-haven premium diminishes. The market awaits further developments, but the risk of a breakdown remains high, especially with Trump’s unpredictable stance.
If geopolitical tensions flare again, it could trigger a new wave of risk-off, pushing the dollar higher and reversing euro gains. Additionally, war impacts and rising memory costs are reigniting US inflation pressures, limiting the Fed’s room for rate cuts and possibly prompting rate hikes.
The current price structure around 1.1600 acts as a short-term static support zone. If the euro fails to stay above this level, a further correction toward 1.1500 could be likely.

In summary, geopolitical risks still dominate market sentiment, and the information environment is too complex for a clear trend. Markets face conflicting signals: positive signs of ceasefire and diplomatic progress versus risks of escalation and policy hawks. This “mixed signal” environment leads to range-bound trading, with support below and resistance above, locked in a volatile oscillation.
As news continues to fluctuate and information becomes unreliable, the market enters a “fatigue” phase, with fewer triggers for emotional surges like initial conflicts.
In this context, the market is entering a typical “tug-of-war” period: lots of news, noise, but fewer new variables capable of changing the trend. The control of the Strait of Hormuz remains a key issue. Any setbacks in peace talks could send oil prices back above $100 per barrel, while renewed tensions could boost safe-haven flows into the dollar, pushing the index higher and exerting renewed pressure on the euro.
Currently, ECB and Fed monetary policies are aligned, with mutual influence driving EUR/USD into a short-term range-bound consolidation. The overall technical picture shows a “upward constraint with shallow pullbacks.”

In the short term, EUR is likely to continue oscillating within a range, with focus on upcoming economic data and Middle East developments affecting energy prices. If inflation data reflect persistent second-round effects, policy signals may gradually shift to cautious adjustments; if growth slows further, data dependency will provide some buffer.
Long-term, EUR’s trend will be influenced by energy dynamics, underlying inflation evolution, and monetary policy transmission, gradually adapting to uncertainty.
Technically, since EUR has already risen and hit recent highs, without further fundamental confirmation, bulls reducing exposure is not surprising. If the decline continues with increased volatility, it may signal rising macro risk pricing.
EUR previously faced resistance around 1.1800, a key recent barrier and a critical retracement zone since falling from 1.2080. Failure to break through could trigger some funds to view it as a short-term pressure zone.
Potential technical risks suggest that bulls should defend the 1.1600 level to maintain upward momentum, aiming to push the price higher. If this support fails, the risk of a deeper correction toward 1.1500 increases.
To drive a new rally, bulls need to consolidate above 1.1800 and generate volume and momentum resonance to target 1.1920.
EUR Short-term route reference:
Uptrend: 1.1800-1.1920
Downtrend: 1.1600-1.1500

Prudent capital (position) planning, risk control (stop-loss), and disciplined trading are the top priorities. $EURUSD