EUR/USD rose on Wednesday, shaking off an overnight fall to 1.0470 on EBS, as Fed Chair Jerome Powell delivered no new surprises in his familiar message of determination to fight inflation, which could encourage euro bulls.
Powell said the Fed is strongly committed to bringing inflation back down and is moving expeditiously to do so nS0N2UQ02N.
He also said a string of rate hikes are priced in and that's appropriate nW1N2WO015.
Interest rates were lower before the testimony and fell further after the comments as investors reduced expectations for the terminal Fed rate.
March 2023 Eurodollar futures prices EDH3 struck a 7-session high and 2-year Treasury yields US2YT=RR fell below the 10-day moving average to a 7-session low.
The dollar's yield advantage over the euro further eroded as German-U.S.
2-year yield spreads tightened.
EUR/USD's rally resulted in the formation of a daily bull hammer candle.
The 50% Fibo of the 1.0774-1.0359 decline and the daily cloud base were pierced again, reinforcing bullish signals.
Further softening in U.S. rates would weaken the dollar more, potentially allowing EUR/USD to rally toward key 1.0750/1.0800 resistance.
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