So much for the dovish Fed breathing new life into the EUR/USD rally.
After a brief post-meeting spurt higher to a 2-month peak, the euro retreated into negative territory on Thursday, with rising U.S. yields and bearish technical signals foreshadowing more losses.
The U.S. 10-year yield US10YT=RR rallied above trend line resistance on Wednesday, exceeding 1.66% before falling to test the topside of that trend line.
The line held and yields rallied to a 12-session high above 1.68% on Thursday, generating very bullish technical signals that imply yields could test the March monthly high.
December 2022 eurodollar EDZ2 prices fell after rallying sharply on Wednesday, suggesting investors were pulling forward expectations for a Fed rate hike and also generating bearish technical signals.
Bearish EUR/USD chart signals included an inverted daily hammer forming and daily RSI diverging on Friday's high, while RSI was near overbought territory.
The risk of EUR/USD correcting lower has increased, with the possibility of a fall toward 1.1990.
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