EUR/USD Technical and Fundamental Analysis: May 29, 2026

Technical Outlook

The EUR/USD 4-hour chart reveals a shift in the established upward trend that originated in early 2025. While the primary trend remains technically intact, the current structure has assumed a corrective nature. Analysts are monitoring the potential for a wave C development, which could see price action test levels below 1.1400 if the current downward momentum persists.

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On lower time frames, a completed three-wave upward correction has been followed by an impulsive downward phase. If this technical assumption holds, the pair may continue to form a five-wave structure as part of a broader correction. However, should the bearish momentum falter, a correction could potentially conclude near the 1.1578 support level.

Fundamental Drivers and Inflation Data

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The Euro's recent performance has been pressured by preliminary May inflation data from Germany. The report indicated an annual inflation rate of 2.6%, missing market expectations by 0.3 percentage points and marking a decline from April figures. As Germany represents the largest economy in the Eurozone, this slowing inflation trend suggests potential cooling across the entire bloc.

This data has prompted a reassessment of European Central Bank (ECB) policy expectations. Previously, the market anticipated that the ECB would be the sole major central bank tightening policy in June. With signs of cooling inflation, the likelihood of such a move has diminished, potentially reducing the Euro's yield appeal compared to the U.S. Dollar.

Market Sentiment and Geopolitical Context

While the technical outlook leans bearish, significant dollar strength remains contingent on geopolitical stability. Ongoing negotiations between Washington and Tehran act as a limiting factor for aggressive USD gains. As long as a diplomatic resolution remains a possibility, the U.S. Dollar may struggle to sustain a prolonged upward trajectory.

Summary and Key Targets

In the near term, technical targets remain focused near the 1.1352 level, which aligns with the 38.2% Fibonacci retracement. Once the current A-B-C corrective structure concludes, a potential for a new long-term upward trend exists. Traders are advised to utilize protective stop-loss orders given the inherent uncertainty in market projections and the impact of evolving geopolitical events.

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