EUR/USD: Range-bound trading continues; institutions warn of dollar volatility risk ahead of CPI.
2026-05-11 20:14:50
On Monday (May 11), during the European session, the euro/dollar pair showed a slightly bullish trend with an intraday low of 1.1745 and a high of 1.1780, with an overall fluctuation range of about 35 basis points. This is a typical range-bound market without a clear one-sided trend.
The euro continues its range-bound trading against the US dollar, repeatedly failing to break through the 1.1800 level in recent days. This pattern is particularly pronounced. Historically, this currency pair has often exhibited this behavior, leaving many traders feeling the market is dull and uninteresting, making it unworthy of trading.
ING Group holds a similar view in its latest analysis, believing that the euro/dollar will continue its consolidation pattern. Although the exchange rate is currently performing steadily, it is mainly benefiting from the recent market environment of rising risk appetite and a weaker dollar, as well as the strong performance of the artificial intelligence industry in Asia (South Korea and Taiwan). These factors not only support global emerging market currencies but also provide indirect support for the euro.
However, ING also points out that the euro's own outlook is not optimistic: Eurozone economic activity data is weak, and if it weren't for the expectation that the European Central Bank (ECB) might raise interest rates this summer, the euro/dollar exchange rate would likely have fallen back to 1.15. With oil prices remaining high, the ECB is likely to maintain a hawkish stance, and speeches by Lagarde and Philip Lane this Wednesday may further solidify market expectations of a 25 basis point rate hike on June 11, which is currently priced in with an 82% probability. Even so, ING emphasizes that unless a peace agreement is reached in the US-Iran conflict this week, the euro/dollar exchange rate is unlikely to break through the 1.18 level. Instead, it may face a greater risk of falling below 1.1700 due to rising US prices and the pricing of a hawkish Fed policy.
The current trading range may be about to change: recent price action shows consistently rising lows and a steepening upward trend line, indicating strong bullish momentum. The uncertain outlook for the US dollar, coupled with its overall weakness, further reinforces market expectations: the euro/dollar pair is poised to break strongly above 1.1800, initiating a significant bullish move. As the chart below shows, the key price level of 1.1800 has been tested multiple times. The price has repeatedly faced resistance and consolidated before a breakout; once successfully broken, it often leads to a stronger one-sided move, resulting in substantial profits for long positions. The price has been consolidating below 1.1800 with decreasing volume, attracting more traders to consider positioning themselves.
Technical Analysis
The price action shows a pattern of higher lows, with the 1.1800 level forming a clear resistance level. Currently, the lack of a clear long-term trend supports the continued range-bound trading pattern. The chart clearly shows a gradually rising upward trend line with an increasingly steep slope, which is a bullish signal.
(EUR/USD daily chart source: FX678)
For this currency pair, buying on dips is often more cost-effective than chasing breakouts, as the market is prone to retracements after rapid short-term price movements. Since May, the price has formed a bullish triangle pattern with a flat top, and the selling pressure around 1.1800 is gradually being absorbed, while bullish momentum is building. Since February, the price has failed to break above 1.1800; a successful breakout would have significant technical implications. Trend-following traders can refer to the entry rules of mainstream trend funds to choose entry points. Furthermore, if the price breaks through 1.1800, there is ample upside potential up to the next resistance level of 1.1840.
Be wary of the risk of a sudden strengthening of the US dollar.
The US-Iran conflict and geopolitical tensions have persisted for months, and the market has become accustomed to it. In particular, Trump's repeated tough statements without concrete action have led the market to gradually downplay this risk. However, Iran has now explicitly rejected the US-proposed ceasefire agreement, and its negotiating conditions far exceed Trump's bottom line. This means that the US-Iran situation could escalate again at any time, potentially leading to a substantial military conflict, which often happens very suddenly. Trump habitually chooses to deploy military operations during weekends when financial markets are closed, but sudden military news, unexpected conflicts, or a rapid escalation of the situation can all drive up demand for the safe-haven dollar and cause it to strengthen rapidly in the short term. It is worth noting that if geopolitical conflict triggers a sharp jump in natural gas prices, the euro may face broader downward pressure.
US CPI data becomes a key variable.
Jim Reid's team at Deutsche Bank points out that the market is digesting Friday's US non-farm payroll report, which was generally robust and further reinforced the market view that the labor market is resilient and inflation risks persist. While the report is not enough to fundamentally change the policy outlook, it also failed to alleviate market concerns about persistently high potential inflationary pressures, especially given the continued robust wage growth and the undeniable risk of sticky inflation.
While the US-Iran situation continues to dominate market focus, this week's market will revolve around a flurry of US data and policy developments, with the April CPI data released on the evening of May 12th (Beijing time) undoubtedly being the core highlight. Deutsche Bank economists predict that the overall US CPI will rise 0.58% month-on-month in April, a slowdown from March's 0.9%, but still at a relatively high level; the core CPI is expected to accelerate from 0.2% to 0.39% month-on-month, meaning that even with the fading of energy-related impacts, underlying price pressures remain persistent. Year-on-year, the overall CPI will rise from 3.3% to 3.8%, and the core CPI from 2.6% to 2.8%.
On the next data front, the Producer Price Index (PPI) will be released on Wednesday, with the focus this week on economic activity indicators: retail sales are expected to decline by 0.3% month-on-month, a pullback from the strong 1.7% increase in March, indicating a possible decline in consumer spending; industrial production is expected to rise slightly by 0.2% month-on-month, reversing the previous 0.5% decline, suggesting that manufacturing output is beginning to stabilize. Deutsche Bank emphasizes that the euro remains vulnerable against the dollar ahead of these key data releases, and the dollar's performance will be directly driven by inflation data and expectations of Federal Reserve policy.
Are there opportunities to short sell?
In forex trading, it is not advisable to excessively bet on the direction of the market. Although the most cost-effective trading opportunity today seems to favor going long, the possibility of the market encountering renewed pressure at the key resistance level of 1.1800 and turning completely downwards cannot be ignored.
If the exchange rate touches the 1.1790–1.1800 range and closes with a large, full-bodied bearish candlestick, releasing clear downward momentum, it would be an excellent short-selling signal. If this is coupled with news of a de-escalation in US-Iran tensions and the impossibility of a short-term peace agreement, the success rate of short selling would further increase. According to institutional views, if US CPI data is stronger than expected, it could trigger a hawkish shift in the Federal Reserve's policy expectations, thereby pushing the EUR/USD below 1.1700. This scenario warrants close attention from short-selling traders.
EUR/USD Market Outlook
The key focus today is the exchange rate's reaction after touching the 1.1790-1.1800 range, which will be the dividing line between bullish and bearish sentiment for the day. If the exchange rate holds above 1.1800, it will present a good opportunity to go long; if it encounters resistance and falls back within this range, exhibiting a clear bearish trend, then shorting opportunities may arise, but the subsequent resistance to further bearish movement will be significantly greater than that to bullish movement.
Today is Monday, and there are no major economic data releases scheduled, so market trading is likely to be relatively quiet, with limited directional price fluctuations. However, caution is advised as key data releases this week, including US CPI and PPI figures, coupled with speeches from European Central Bank officials and geopolitical risks, could lead to a significant increase in volatility. Traders are advised to prepare risk management strategies in advance.
Combining the views of ING and Deutsche Bank, the key short-term support level to watch is the psychological level of 1.1700. A break below this level could lead to a further decline to 1.1672. Resistance levels are concentrated in the 1.1800–1.1840 range, and a breakout would require clear catalysts from data or policy.
The euro continues its range-bound trading against the US dollar, repeatedly failing to break through the 1.1800 level in recent days. This pattern is particularly pronounced. Historically, this currency pair has often exhibited this behavior, leaving many traders feeling the market is dull and uninteresting, making it unworthy of trading.
ING Group holds a similar view in its latest analysis, believing that the euro/dollar will continue its consolidation pattern. Although the exchange rate is currently performing steadily, it is mainly benefiting from the recent market environment of rising risk appetite and a weaker dollar, as well as the strong performance of the artificial intelligence industry in Asia (South Korea and Taiwan). These factors not only support global emerging market currencies but also provide indirect support for the euro.
However, ING also points out that the euro's own outlook is not optimistic: Eurozone economic activity data is weak, and if it weren't for the expectation that the European Central Bank (ECB) might raise interest rates this summer, the euro/dollar exchange rate would likely have fallen back to 1.15. With oil prices remaining high, the ECB is likely to maintain a hawkish stance, and speeches by Lagarde and Philip Lane this Wednesday may further solidify market expectations of a 25 basis point rate hike on June 11, which is currently priced in with an 82% probability. Even so, ING emphasizes that unless a peace agreement is reached in the US-Iran conflict this week, the euro/dollar exchange rate is unlikely to break through the 1.18 level. Instead, it may face a greater risk of falling below 1.1700 due to rising US prices and the pricing of a hawkish Fed policy.
The current trading range may be about to change: recent price action shows consistently rising lows and a steepening upward trend line, indicating strong bullish momentum. The uncertain outlook for the US dollar, coupled with its overall weakness, further reinforces market expectations: the euro/dollar pair is poised to break strongly above 1.1800, initiating a significant bullish move. As the chart below shows, the key price level of 1.1800 has been tested multiple times. The price has repeatedly faced resistance and consolidated before a breakout; once successfully broken, it often leads to a stronger one-sided move, resulting in substantial profits for long positions. The price has been consolidating below 1.1800 with decreasing volume, attracting more traders to consider positioning themselves.
Technical Analysis
The price action shows a pattern of higher lows, with the 1.1800 level forming a clear resistance level. Currently, the lack of a clear long-term trend supports the continued range-bound trading pattern. The chart clearly shows a gradually rising upward trend line with an increasingly steep slope, which is a bullish signal.
(EUR/USD daily chart source: FX678)
For this currency pair, buying on dips is often more cost-effective than chasing breakouts, as the market is prone to retracements after rapid short-term price movements. Since May, the price has formed a bullish triangle pattern with a flat top, and the selling pressure around 1.1800 is gradually being absorbed, while bullish momentum is building. Since February, the price has failed to break above 1.1800; a successful breakout would have significant technical implications. Trend-following traders can refer to the entry rules of mainstream trend funds to choose entry points. Furthermore, if the price breaks through 1.1800, there is ample upside potential up to the next resistance level of 1.1840.
Be wary of the risk of a sudden strengthening of the US dollar.
The US-Iran conflict and geopolitical tensions have persisted for months, and the market has become accustomed to it. In particular, Trump's repeated tough statements without concrete action have led the market to gradually downplay this risk. However, Iran has now explicitly rejected the US-proposed ceasefire agreement, and its negotiating conditions far exceed Trump's bottom line. This means that the US-Iran situation could escalate again at any time, potentially leading to a substantial military conflict, which often happens very suddenly. Trump habitually chooses to deploy military operations during weekends when financial markets are closed, but sudden military news, unexpected conflicts, or a rapid escalation of the situation can all drive up demand for the safe-haven dollar and cause it to strengthen rapidly in the short term. It is worth noting that if geopolitical conflict triggers a sharp jump in natural gas prices, the euro may face broader downward pressure.
US CPI data becomes a key variable.
Jim Reid's team at Deutsche Bank points out that the market is digesting Friday's US non-farm payroll report, which was generally robust and further reinforced the market view that the labor market is resilient and inflation risks persist. While the report is not enough to fundamentally change the policy outlook, it also failed to alleviate market concerns about persistently high potential inflationary pressures, especially given the continued robust wage growth and the undeniable risk of sticky inflation.
While the US-Iran situation continues to dominate market focus, this week's market will revolve around a flurry of US data and policy developments, with the April CPI data released on the evening of May 12th (Beijing time) undoubtedly being the core highlight. Deutsche Bank economists predict that the overall US CPI will rise 0.58% month-on-month in April, a slowdown from March's 0.9%, but still at a relatively high level; the core CPI is expected to accelerate from 0.2% to 0.39% month-on-month, meaning that even with the fading of energy-related impacts, underlying price pressures remain persistent. Year-on-year, the overall CPI will rise from 3.3% to 3.8%, and the core CPI from 2.6% to 2.8%.
On the next data front, the Producer Price Index (PPI) will be released on Wednesday, with the focus this week on economic activity indicators: retail sales are expected to decline by 0.3% month-on-month, a pullback from the strong 1.7% increase in March, indicating a possible decline in consumer spending; industrial production is expected to rise slightly by 0.2% month-on-month, reversing the previous 0.5% decline, suggesting that manufacturing output is beginning to stabilize. Deutsche Bank emphasizes that the euro remains vulnerable against the dollar ahead of these key data releases, and the dollar's performance will be directly driven by inflation data and expectations of Federal Reserve policy.
Are there opportunities to short sell?
In forex trading, it is not advisable to excessively bet on the direction of the market. Although the most cost-effective trading opportunity today seems to favor going long, the possibility of the market encountering renewed pressure at the key resistance level of 1.1800 and turning completely downwards cannot be ignored.
If the exchange rate touches the 1.1790–1.1800 range and closes with a large, full-bodied bearish candlestick, releasing clear downward momentum, it would be an excellent short-selling signal. If this is coupled with news of a de-escalation in US-Iran tensions and the impossibility of a short-term peace agreement, the success rate of short selling would further increase. According to institutional views, if US CPI data is stronger than expected, it could trigger a hawkish shift in the Federal Reserve's policy expectations, thereby pushing the EUR/USD below 1.1700. This scenario warrants close attention from short-selling traders.
EUR/USD Market Outlook
The key focus today is the exchange rate's reaction after touching the 1.1790-1.1800 range, which will be the dividing line between bullish and bearish sentiment for the day. If the exchange rate holds above 1.1800, it will present a good opportunity to go long; if it encounters resistance and falls back within this range, exhibiting a clear bearish trend, then shorting opportunities may arise, but the subsequent resistance to further bearish movement will be significantly greater than that to bullish movement.
Today is Monday, and there are no major economic data releases scheduled, so market trading is likely to be relatively quiet, with limited directional price fluctuations. However, caution is advised as key data releases this week, including US CPI and PPI figures, coupled with speeches from European Central Bank officials and geopolitical risks, could lead to a significant increase in volatility. Traders are advised to prepare risk management strategies in advance.
Combining the views of ING and Deutsche Bank, the key short-term support level to watch is the psychological level of 1.1700. A break below this level could lead to a further decline to 1.1672. Resistance levels are concentrated in the 1.1800–1.1840 range, and a breakout would require clear catalysts from data or policy.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
