EUR/USD generated short-term bull signals on Wednesday nL2N2W40S5 after rebounding from a fall below the 76.4% Fibo of 1.086-1.1185 to a one-month low of 1.08735 on EBS, but rallies such as these may be opportunities for bears as an aggressive Fed tightening plan diverges with the ECB.
Daily techs highlight short-term upward risks as RSI diverged on Wednesday's low and a bull hammer candle formed.
Longer-term techs remain bearish and the down trend should resume.
Investors were still refining their expectations for the Fed's terminal rate, with Eurodollar futures EDU3 falling to a fresh 6-1/2-year low.
Hawkish Fed rhetoric nL2N2W31W3 is increasing investors expectations for aggressive tightening.
Recent Fed comments indicate the central bank will take a much more aggressive rate hike path than the ECB will.
U.S. and euro zone yield differentials should continue to favor the dollar, which should keep corrective rallies limited and the down trend intact.
The euro zone's proximity to the Russia-Ukraine conflict is another downside risk to the euro.
Once EUR/USD's corrective bounce completes, the bear trend will resume and a test of the 1.0800 area is likely.
Should that support break the 2020 yearly low at 1.0636 comes into focus.
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