Larger correction looks very unlikely at this point
With the dollar remaining in favour after yesterday’s stronger US data, the ability of EURUSD to retrace back towards 1.20 is looking increasingly unlikely.
One last hurdle remains to the downside, the 76.4 fib (some may prefer the 78.6 but there isn’t a huge amount of difference). If this falls, any hope of a larger retracement is surely dashed.
This fib level falls around the lows we saw in late August which may increase its appeal as a possible support/rotation level. Whether it can then generate any significant upside is another thing, but it’s a start.
Ultimately, the pair is back in the channel and below all key moving averages on the daily and 4-hour chart. So it would appear a shallow retracement is all we’ve got. Time will tell if that’s the case and the Fed will probably have a massive role to play in that next Wednesday.
A dovish Fed, even one still warning of a taper, maybe enough to take the wind out the sails of the dollar rally and give the pair a lift. It’s a lot to ask but if it happens then 1.20, which feels so far away at the moment, may come back into play.
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