EURUSD sees more upside above 1.0400 as fears of geopolitical tensions vaporize

• EURUSD is expected to witness more gains after an establishment above the immediate hurdle of 1.0400.
• Market impulse has cooled down as the Russia-Polish noise has calmed.
• Fed’s Daly has considered a range of 4.75% - 5.25% as reasonable for policy rate end-point

The EURUSD pair has rebounded after retracing to near 1.0355 in the early Asian session. The asset is majorly sideways but is expected to pick up momentum after crossing the immediate of 1.0400 decisively. The major is re-gaining strength as the risk profile is turning positive led by vanishing fears of geopolitical tensions between Russia and Poland.

The market impulse was heated after the Polish government blamed Russia for striking two stray missiles in their region. While things turned next to normal when NATO ambassadors cited that missiles belonged to Ukraine. This has led to a volatility contraction in the US dollar index (DXY) and a power-pack action is expected for the overall market ahead.

S&P500 faced volatility on Wednesday as general merchandise retailer Target Corp (TGT) trimmed its sales forecast, which indicates that consumer spending will trim further. Earlier Federal Reserve (Fed) Beige Book also cleared that consumer spending has been scaled down to 1.4% in the third quarter from the prior release of 2.0%.

Meanwhile, the returns on the US government bonds are losing their traction as investors see an adaptation of a less-aggressive approach by the Fed in its December monetary policy meeting. The 10-year US Treasury yields are on a losing spree and have dropped below the crucial support of 3.70%. The yields have plummeted further despite San Francisco Fed President Mary Daly hiking its interest rate guidance.

Fed policymaker has considered a range of 4.75% - 5.25% as reasonable for the policy rate end-point. She further added that the central bank wants to see a slowdown in the economy to cool down the red-hot inflation.

On the Eurozone front, clarity over the Russia-Poland noise has vanished fears of further supply chain disruptions. Meanwhile, European Central Bank (ECB) Governing Council member Ignazio Visco said on Wednesday that the need for continued tightening is evident but noted that the case for implementing a less aggressive approach was "gaining ground," as reported by Reuters.