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EUR/USD reference rates at publication:Spot: 1.1945Bank transfers (indicative guide): 1.1530-1.1614Money transfer specialist rates (indicative): 1.1840-1.1865More information on securing specialist rates, hereSet up an exchange rate alert, hereForeign exchange analysts are backing further Dollar strength in the wake of the U.S. Federal Reserve meeting, but the Euro-Dollar exchange rate's dip below 1.20 could ease selling pressures as bargain hunters return to the market.

One analysts does warn however that a move to 1.1695 would substantially unsettled the market.

Martin Miller, Market Analyst at Reuters says the U.S. dollar is likely to remain in demand in coming sessions in response to a shift by the Federal Reserve, an increasingly bullish technical chart (for the Dollar index) and outstanding vulnerable shorts.

"The dollar jumped on Wednesday after the Fed brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference to the crisis weighing on the economy," says Miller.

The Dollar rose sharply against its peers, sending the Pound-Dollar exchange rate below 1.40 and the Euro-to-Dollar exchange rate below 1.20 which represents a potentially notable technical development.

Boulton's analysis shows the U.S. Dollar index - which tracks the dollar versus a basket of six currencies - registered its biggest one-day gain since March 2020 to close above the 91.025 Fibonacci level, a 38.2% retrace of its 93.439 to 89.533 (March to May) drop.

He says there is scope for further gains to the 91.947 Fibonacci level which would represent a 61.8% retrace of the same 93.439 to 89.533 drop.

Above: Four-hour chart showing the jump in the Dollar index.

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"While some buy stops associated with the growing speculative shorts have been triggered due to the dollar's big rise since the week ending June 8, continued dollar gains are putting a squeeze on outstanding shorts," says Miller.

The Euro-Dollar's post-Fed slump comes as traders betting heavily on a rise in the exchange rate exit mainly profitable positions, "and that's a crucial factor that will determine movement this summer," says Miller's colleague Jeremy Boulton.

With regards to the Euro-Dollar outlook, the decline will likely invite fresh buying interest that analysts say could ease the sell-off.

"Winning bets are usually re-established, so traders buying dips after exiting bullish bets leading to orderly correction of the uptrend," says Boulton.

But, "marked changes in trading patterns occur when the balance of betting turns from winning to losing bets, and for some that may soon happen."

Above: Daily chart showing EUR/USD price action in 2021

Reuters data shows $6BN of the current $16BN staked on a rise was added after April 16, when EUR/USD reached 1.1995 from 1.1872, suggesting to Boulton that EUR/USD is probing levels where a substantial proportion of those who are long entered their bets.

The other $10BN longs were established a long time ago with traders buying well below current levels.

"It will probably take a push below 1.1695, which is the minimum objective for a technical correction of the rise influenced by the pandemic, to unsettle these positions," says Boulton.

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