Elliott Wave Analysis of EURUSD – May 18th, 2026

Key Takeaways

• EURUSD fell ~1.5% after U.S. Treasury yields spiked
• Fed rate‑hike probability rose to 70% following latest data
• Technical Elliott Wave suggests a corrective wave down to 1.0550
• Support level near 1.0600 could halt further decline
• Potential rebound if U.S. inflation eases and yields retreat

Pulse Analysis

The recent tumble in EURUSD stems from a sharp rise in U.S. Treasury yields, which have climbed to multi‑year highs as inflation data keep the Federal Reserve’s tightening agenda alive. Investors are now pricing a roughly 70% chance of another rate hike, a shift that strengthens the dollar and squeezes the euro. This macro backdrop is compounded by weaker euro‑zone growth forecasts, creating a perfect storm for the currency pair and prompting traders to reassess risk exposure.

Applying Elliott Wave analysis, the current price action is interpreted as a corrective wave (often labeled a "B" wave) within a larger downtrend. The wave count suggests the pair could test the 1.0550‑1.0600 region, a historically significant support zone that aligns with prior swing lows. Should the wave fail to break this level, a short‑term bounce may emerge, offering a tactical entry point for contrarian positions. Conversely, a breach would open the path toward deeper targets near 1.0450, reflecting the next wave extension in the downtrend.

For market participants, the implications are twofold. First, currency‑exposed corporates may need to lock in forward contracts to mitigate further dollar strength, especially those with euro‑denominated revenue. Second, speculative traders should watch U.S. yield movements and upcoming CPI releases, as any surprise easing could trigger a rapid EURUSD reversal. In the broader context, the euro’s trajectory will continue to mirror the Fed’s policy path, making yield differentials the primary driver of future price swings.