EUR/USD – Heading for a correction?

How big will it be?

We’ve seen a slight recovery in EURUSD over the last week, taking the pair back to the top of the descending channel it’s traded in since mid-June.

The top of the channel coincides with the 38.2 fib level (September highs to October lows) so could mark a shallow correction in the downtrend. Or it could be the first test in a broader corrective move.

A move through the descending channel could point to a much larger correction in the dollar, which has been slipping across the board recently and may continue to if markets continue to price in more aggressive tightening from central banks around the world.

The next test for the pair above the descending channel falls around 1.17, the 200/233-period SMA on the 4-hour chart. The real test, though, lies around the 50 and 61.8 fib levels, which coincides with the 55/89-day SMA band.

A move above here could be a very bullish signal for the pair.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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