For now, it seems that EURUSD bears are exhausted, which suggests the possibility of a forex correction. The pair is still stalling around its current levels, after experiencing a wave of selling pressure in the past week. At that time, the ECB rate decision served as a strong economic catalyst that pushed the pair in a longer-term downtrend.
In that case, EUR/USD could retreat to the 1.3000 major psychological level, which has turned from being support into potential resistance. A higher pullback could take price up to the 38.2% Fibonacci forex correction level, which is close to the 1.3100 major psychological resistance.
The line in the sand for the potential forex correction signal is around the 61.8% Fib, which is near the 1.3200 major psychological level. A strong climb past that level could be a sign that the price is starting to reverse off its downtrend already.
EURUSD Forex Correction
US retail sales figures are up for release today and these might show a strong pickup in spending, which would then push EURUSD much lower. On the other hand, weaker than expected data might lead to a sharper forex correction for this pair, as traders might be keen to book profits off their dollar holdings.
Stochastic is still reflecting selling pressure though, as the oscillator is moving down from the overbought zone. This suggests that bears are still in control and might actually push for a downside break below the previous lows or the 1.2900 major psychological support.
Further losses below the 1.2900 mark could push EURUSD to the next long-term support zone at 1.2500. If this indeed is a bearish continuation pattern, the selloff might be of the same size as the previous drop, which is roughly 250 pips. With that, the 1.2650 area might also hold as near-term support for any downtrend.
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