EUR/USD has staged a rebound following Monday's sharp decline. However, the pair could have a difficult time attracting buyers as investors brace for a hawkish Fed surprise, FXStreet’s Eren Sengezer reports.

Buyers are unlikely to commit to a steady recovery

“Several news outlets reported on Monday that the Fed could opt for a 75 bps rate hike this week, triggering a rally in US Treasury bond yields.”

“EUR/USD is facing initial resistance at 1.05, where the Fibonacci 23.6% retracement of the latest downtrend is located. In case the pair managed to reclaim that level, it could edge higher toward 1.0520 (20-period SMA) and 1.0540 (Fibonacci 38.2% retracement).”

“On the downside, 1.04 (static level, psychological level) aligns as first support ahead of 1.0380 (static level) and 1.0350 (multi-year low set in May).”

See: EUR/USD to test 1.05 on upbeat German ZEW – ING