Rejection at Local Resistance Paves the Way for a Bearish Pullback

Central Bank

Economic

Summary:

This repeated failure to establish higher highs suggests that a corrective downward move is now in development, with price action likely gravitating toward the 1.1631 target.

SELL EURUSD

EXP

TRADING

1.17288

Entry Price

1.16310

1.18300

1.17845 +0.00616 +0.53%

0.0

Pips

Flat

1.16310

Exit Price

1.17288

Entry Price

1.18300

Cleveland Fed President Beth Hammack recently stated that interest rates are likely to remain anchored at current levels for a protracted duration. She noted that a primary concern among business leaders is that an "inflationary mindset" is beginning to become structurally entrenched within the public consciousness. Simultaneously, Mary Daly of the San Francisco Fed adopted a neutral to slightly hawkish posture, reaffirming her commitment to returning inflation to the 2% target. Daly characterized current policy as "slightly restrictive," suggesting that while it is working to cool the economy, a definitive resolution to the ongoing conflict between the United States and Iran could further alleviate downward pressure on prices.

This sentiment aligns with observations from Chicago Fed President Austan Goolsbee, who noted that the friction in the Middle East is increasingly mirroring a classic inflationary shock. While Goolsbee clarified that the situation has not yet transitioned into a "stagflationary" event—which would involve simultaneous damage to the labor market and a spike in inflation—he emphasized that such a scenario would force the Federal Reserve into a difficult position, requiring a prioritized defense of one side of its dual mandate over the other. Simultaneously, St. Louis Fed President Alberto Musalem adopted a more hawkish stance, asserting that the balance of risks has shifted decisively toward inflation control. Musalem suggested that several plausible economic scenarios could necessitate holding rates steady for an extended period, adding that current policy remains neutral or even slightly accommodative when viewed in real terms.

These hawkish undertones are further substantiated by remarkably resilient domestic labor data. The latest ADP National Employment Report revealed that the U.S. private sector added 109,000 positions in April, marking the most substantial monthly gain in over a year and a quarter. This figure comfortably exceeded market forecasts and represented a significant acceleration from the revised March print of 61,000, suggesting that the labor market remains exceptionally tight despite elevated borrowing costs.

Amidst this monetary tightening narrative, geopolitical volatility continues to intensify. Iran has reportedly implemented stringent new protocols for vessels navigating the Strait of Hormuz. In an effort to exert tighter control over this critical artery—which handles 20% of global oil flows—commercial ships are now required to coordinate their transit directly with Iranian military authorities. While it remains unclear if formal transit fees will be imposed, prior reports have suggested figures as high as $2 million per passage, a development that could add significant structural costs to global energy supply chains.

Across the Atlantic, ECB policymaker Isabel Schnabel issued a stern warning, stating that policy would likely need to tighten further if the current energy shock proves to be persistent. Schnabel emphasized that the European Central Bank remains prepared to take all necessary measures to restore inflation to its 2% target. This hawkish stance arrives as the Eurozone reports mixed economic signals; while retail sales in the Eurozone descended by 0.1% month-over-month in March, the broader EU saw a 0.3% increase, pointing to a fragmented short-term momentum. Furthermore, the regional construction sector continues to face severe headwinds, with the Construction PMI plummeting to 41.7 from 44.6 in March—marking the sharpest contraction since August 2024. Rejection at Local Resistance Paves the Way for a Bearish Pullback_1

Rejection at Local Resistance Paves the Way for a Bearish Pullback_1

Technical Analysis

From a technical perspective, EUR/USD has failed to decisively breach the primary resistance handle at 1.1771. This specific zone has now served as a formidable supply wall, triggering a bearish rejection on three separate occasions in recent sessions. This repeated failure to establish higher highs suggests that a corrective downward move is now in development, with price action likely gravitating toward the 1.1631 target.

This downside objective carries significant technical weight as it aligns with the 0.50 Fibonacci retracement and a well-established horizontal resistance-turned-support zone. The pair’s immediate path lower is further supported by the current positioning of the 100 and 200-period Moving Averages (MAs), situated at 1.1733 and 1.1668, respectively. Crucially, price action has recently achieved a decisive close beneath the 100-period MA, a technical shift that could significantly accelerate the current downward impulse.

Our analysis of momentum oscillators provides further validation for this bearish outlook. The Relative Strength Index (RSI) is currently tracking at the 47 level, positioned just beneath technical neutrality. This follows a peak at the 66 level, where the index failed to achieve a higher high despite the recent price test of the ceiling.

Simultaneously, the MACD is printing an upward-sloping histogram that is losing depth with significant velocity. With the signal lines hovering only marginally above the neutral threshold, a bearish crossover appears imminent. Such a development would provide the final technical confirmation required for a sustained and more profound expansion toward the 1.1631 support cluster.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1727

Target price: 1.1631

Stop loss: 1.1830

Validity: May 20, 2026 15:00:00

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Rejection at Local Resistance Paves the Way for a Bearish Pullback

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