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The euro is showing attractive technical signals after hitting a triple bottom. A triple bottom is a visual pattern that shows the buyers (bulls) are taking control of the price action from the sellers (bears). From a fundamental view, there is also a strong thesis to make on the pair EURUSD; many expect that the US dollar is about to see a peak as its biggest bullish driver, yields on Treasuries, have already significantly risen and are unlikely to move much higher from here. 

The yen trades at a fresh 6-year low against USD as Treasury yields continue to march higher. USDJPY is advancing 0.84%, so far, breaking above 122 as the interest differential between the two hit 2.1%, the highest since mid-2019. The yen remains an oasis of opportunity for FX traders, exhibiting the kind of impulsive trending price action that has been sadly absent from that asset class in recent years.

The Bank of England (BOE) raised rates by 25 basis points to 0.75%, as expected. However, the communication was more accommodative than anticipated, sending the GBP/USD down to 1.31 from 1.32, a move of 0.75%. One of the nine members of the BOE voted to keep rates unchanged. The central bank expects modest tightening, softening its tone from prior guidance. The BOE said the UK economic outlook deteriorated and expects inflation pressure from the war to be temporary, despite predicting inflation could rise to 8% in the second quarter. 

There were no big surprises for investors yesterday as the Fed delivered a 25bps hike and flagged six more increases throughout the year, an aggressive policy stance that essentially matches market estimates. The dollar rallied on the news, yet failed to maintain momentum. The spread between the 2 and the 10-year yields narrowed further, standing now at 0.2%, implying investors don't buy Fed's aggressive tightening plan. And this could be one of the reasons why the US dollar is lacking strength this morning. However, it is prudent not to get carried away. The greenback remains the ultimate safe-haven currency and more data is needed before one could assert a trend reversal. 

The EUR/USD pair dropped 3.6% in the past month as the war in Ukraine began. The risk of further decline is real as the war escalates and Western sanctions aimed at Russia, in turn also hurt the European continent to some degree. As the most liquid short available, the euro is particularly vulnerable to further risk-aversion. The probability that the euro will drop below parity with the dollar this year has climbed to 9.6%, according to Bloomberg's FX Rate Forecast Model. Similarly, as a result of extreme sentiment against the EUR, any good news could see it gain strength on a technical rebound.