Technical Update - Correction time in EURUSD, GBPUSD and Dollar Index

Technical Update - Correction time in EURUSD, GBPUSD and Dollar Index

Forex 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank Group

Summary:  EURUSD is bouncing from strong support at around 1.05. Could move to 1.0663, possibly higher before down trend likely to resume

GBPUSD forming bottom and reversal pattern indicating a bounce to 1.2353 , possibly testing 200 daily Moving Average

Dollar Index running out of steam and is back below key level at 105.80. Correction down to 104.39 in the cards


EURUSD has been in a downtrend for the past two months. But now a correction seems to be unfolding.

EURUSD has reached the strong support area around 1.0515-1.0480. RSI closed yesterday below 25 i.e., in oversold territory.

If RSI is closing above its upper falling trend there is great likelihood of a EURUSD correction to test the upper falling trendline and the 0.3825 retracement at 1.0663.
However, if EURUSD is closing above the upper falling trend line a correction could continue all the way up to the 0.618 retracement at around 1.0775

If EURUSD is closing this Friday above 1.0635 it has closed the week, the month and the quarter above a key resistance level. That could lead to the weekly RSI closing back above 40 meaning it would still be in positive sentiment.
If EURUSD is failing to close above 1.0635 today – the end of the week and month - the downtrend is still in play on all time periods.

If EURUSD closes below 1.0480 there is no real strong support until around 1.0240. Minor support at around 1.0438

Source all charts and data: Saxo Group

GBPUSD formed yesterday a Bullish Engulfing candle. A fairly rare occurrences in daily FX and since FX is an OTC market it is not the most reliable one. However, the power between Sellers and Buyers has shifted and GBPUSD in in for a correction.

A short-term correction up to the 0.382 retracement at around 1.2353 is likely but a spike up to the 200 daily Moving Average should not be ruled out.

RSI is still showing negative sentiment and if it gets rejected at the 40 threshold the bearish trend is likely to resume.

If that scenario plays out GBPUSD is likely to move towards the 1.20 support

Weekly chart RSI closed last week below the 40 threshold i.e., showing negative sentiment medium-term. That is an indication of further downside after a correction. But for now the 545 weekly Moving Average is providing support

Dollar Index closed above strong resistance at around 105.80 and moved higher to the 1.764 projection at 106.37 before the Buyers got exhausted.

The Dollar Index is at the time of writing back below the key level at 105.80. IF breaking below lower rising trendline a correction down to around 104.39 could be seen

If closing the week below 105.80 the weekly chart could be forming a Shooting Star top and reversal candle. If that scenario plays out we are likely to see a correction to a least 104.39 possibly lower.

However, RSI on both daily and weekly is showing positive sentiment regardless of where the Index is closing the week. That is indicating likely higher levels after a correction.

If closing back above 105.80 there is no strong resistance until around 107.70-107.90

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992