The EURUSD pair has already erased half of its Tuesday’s gains and was trading 0.5% weaker ahead of the US session on Wednesday.
The key support now stands at yesterday’s lows at the 1.20 barrier, which is also the major psychological support. If the euro drops below that support, a test of February lows at 1.1950 seems very likely.
The medium-term outlook is slowly turning bearish as US yields continue to spike higher, with the 10-year yield rising toward 1.5% again. Unless the Fed does something, we could see further volatility in the equity markets, which should benefit the safe-haven USD.
Alternatively, the pair needs to get above 1.21 for bulls to be more aggressive, with the next target in the 1.2180 region.
The short-term outlook seems unclear as the pair is jumping up and down, but it looks like bulls are slowly leaving the market on the larger timeframes.