Is the EURUSD correction over? – Paxforex

The EURUSD has dropped sharply and looking just at the chart it seems as if there is no end in sight as traders do not want to try and catch a falling dagger. From a technical perspective you may get conflicting signals depending on your trading strategy. While the EURUSD this week broke down below its 50.0 Fibonacci Retracement level (as visible on the Fibonacci Fan), but this may be a perfect trading situation for a reversal.

The 1.3000 to 1.3100 level is a key technical as well as psychological support area and sellers may find it very challenging to break down below this level unless assisted by negative interference by the European Central Bank governed by Mario Draghi or economic data released out of the Eurozone. The fundamental picture has not been as bleak during this week which may suffice to halt the sharp sell-off.

One of the biggest positive surprises released on the fundamental side was the Eurozone Business Climate Indicator for August which did not only beat estimates for a reading of 0.10, but also came in above July’s reading of 0.17 with a reading of 0.20. There are shimmers of optimism out of the Eurozone and if President Draghi and the ECB will not announce an outright monetary stimulus plan and do not cut interest rates further a major reversal rally may form over the course of September.

Core consumer prices annualized for August also came in better than the 0.8% expected and read 0.9% which is a minor improvement, but the most important fact out of the CPI report for August was that consumer inflation is no longer contracting and if this trend continues in September deflationary pressures would deflate which could additionally boost the Euro away from extreme oversold territory where it currently trades.

Forex traders should take the most resent correction which unfolded this week in the EURUSD at a great entry opportunity to short-trades if they have a longer time-horizon. Any correction down to the 1.3000 mark plus/minus 50 pips should be taken as opportunities to add to existing long positions as any reversal rally may catapult this currency pair violently higher.

Written by Paxforex