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  • Fed reiterated its hawkish stance yesterday, pushing US-DE yield differentials higher.
  • Technical charts reveal the recovery rally has ended.
  • The EUR/USD may drop to 1.17 today.

The EUR/USD fell to an eight-day low of 1.1341 in Asia and could drop to 1.13 by NY close, courtesy of widening yield differentials.

The Fed kept interest rates unchanged yesterday and sounded optimistic as expected, confirming what markets already knew – a 25 basis point rate hike is coming in December.

Simply put, the monetary policy divergence between the Fed and the European Central Bank is set to widen further. As a result, the spread between the US 2-year treasury yield and its German counterpart could continue to climb new heights in the USD-positive manner, having hit a fresh multi-decade high of 358 basis points (bps) yesterday.

The technical charts are also echoing similar sentiments. For instance, the pair closed yesterday 1.1363, confirming a bearish doji reversal, meaning the recovery rally has likely ended and the bears have regained control.

The bear may further strengthen if the spot drops below the key support at 1.13 (August low and October low).

At press time, the EUR/USD pair is trading at 1.1343.

EUR/USD Technical Levels


       Last Price:  1.1342
       Daily change:  -19  pips
       Daily change:  -0.167%
       Daily Open:  1.1361
       Daily SMA20:  1.1437
       Daily SMA50:  1.1546
       Daily SMA100:  1.1582
       Daily SMA200:  1.1847
       Daily High:  1.1447
       Daily Low:  1.1352
       Weekly High:  1.1456
       Weekly Low:  1.1302
       Monthly High:  1.1625
       Monthly Low:  1.1302
       Daily Fibonacci 38.2%:  1.1388
       Daily Fibonacci 61.8%:  1.1411
       Daily Pivot Point S1:  1.1326
       Daily Pivot Point S2:  1.1291
       Daily Pivot Point S3:  1.1231
       Daily Pivot Point R1:  1.1421
       Daily Pivot Point R2:  1.1482
       Daily Pivot Point R3:  1.1517