After the extreme Euro rally of 2025, the crucial question now is: will the euro continue to fall or can the gains be maintained? At the beginning of the year, EUR/USD was still at 1.02, then it shot up steeply until September to nearly 1.19. Now in May 2026, the pair is trading around 1.16, and uncertainty is greater than ever.

The interest rate differential between the Fed and the ECB remains the strongest argument for euro strength. The Fed is still at 3.75-4.00% and continues to cut, while the ECB has already ended its easing phase. Theoretically, this should support the euro—and it has. But now it’s clear: that might not be enough.

What’s currently occupying me is the German risk. The state elections of 2026 are over, and the AfD has become the strongest party in several federal states. The grand coalition appears shaky, and whether the 500-billion stimulus package will fully take effect is questionable. Energy costs in Germany are still twice as high as in the US, infrastructure projects take years or decades. The stimulus could fizzle out before it has a real impact.

France isn’t doing any better. Government chaos, a deficit over 6%, a debt ratio of 113%. French bonds yield higher than Spanish ones—that’s a warning sign that shouldn’t be ignored. The eurozone is growing at 0.2% per quarter, while the US remains robust at 3.8% (annualized).

On the other hand: Will the euro continue to fall? That depends on how long the US can maintain its strength. The AI boom is driving investments, tax reforms are attracting capital. TSMC is building in Arizona, Samsung in Texas, Intel in Ohio. That’s not to be underestimated. But Trump’s attacks on Fed independence are making many international investors nervous. The deficit is running at 6% of GDP.

Technically, I see important support levels at 1.1550 and 1.1470. If these break, it could quickly head toward 1.10-1.12. A breakthrough above 1.20 would open the way to 1.22-1.25, but that requires real good news from Europe.

My assessment: The scenario where the euro continues to fall to 1.08-1.10 or even 1.05 has become more realistic since May. Germany’s crisis, France’s chaos, US resilience—this is an explosive mix. Bank forecasts for the end of 2026 range from 1.18 to 1.25, but reality could look different.

Key events in the coming months: How will the German stimulus program really develop? How stable will the US economy remain? Are there new geopolitical shocks? Given this volatility, I wouldn’t bet on a direction but stay flexible. Buy at 1.10-1.12, sell at 1.18-1.20—that’s probably the safer approach.

The bottom line: whether the euro will continue to fall or not depends on factors we can only partially control. The interest rate divergence helps the euro, but structural problems in Europe and US strength are real counterforces. Anyone trading here should take risk management seriously.