EURUSD is sinking into key support territory with a break of 0.9703 eyed

• EUR/USD bears are in control but the daily structure is intact still.
• The bulls could be about to move in from key support. 

EUR/USD dropped on the day to test a key support area between 0.9750 and the low of the day at 0.9730. The price is pressured om a stronger US dollar following the prior day's Federal Open Maret Committee meeting that ended with a blow-off in risk assets due to the comments from Fed Chair Jerome Powell. 

Treasury yields jumped on Thursday, with the two-year note climbing toward 5% due to Powell saying the "ultimate level" of the US central bank's policy rate would likely be higher than previously estimated. He said that after the Fed announced that they had raised that interest rates by 75 basis points, as expected, to push its target range to 3.75%-4.0%.

ECB/Fed divergence weighs

However, bond and equity markets have sold off on the hawkish stance, supporting the US dollar and remained under pressure on Thursday while traders are roughly evenly split between the odds of a 50 basis-point and 75 basis-point rate hike in December. The peak Fed funds rate is seen climbing to at least 5%, compared with a prior view of 4.50%-4.75% rise and that is fuelling a divergence between the Fed and the European Central Bank given the dovish rhetoric from the ECB's governor, Christine Lagarde.

Lagarde emphasised a data dependency and the meeting-by-meeting approach following the meeting that took place last week. There was no discussion about ending the QE reinvestment policy. Subsequently, Rates markets lowered the ECB's expectations for further rate hikes by around 25bp yesterday and are now pricing 57bp for the December meeting with a peak in the ECB deposit rate to around 2.6%.

 EUR/USD technical analysis

The analysis above was posted after the FOMC on Wednesday and it stated that the daily chart was pointing to a lower level as its tried to break the trendline. ''The M-pattern's last leg is relatively short compared to the front side of the formation so it could be expected to extend lower in the coming sessions on Thursday. However, 0.9700 could be a tough nut to crack.''

The price has extended the last leg of the M-formation and a correction is to be expected at this juncture into the neckline, or at least into the 38.2% Fibonacci level near 0.9830. also to note, the price is now on the backside of the trendline, outside of the symmetrical triangle but is yet to break the daily structure of 0.9703.