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Technical Update - EURUSD, GBPUSD and Dollar Index corrections. More to come or is that it?

Technical Update - EURUSD, GBPUSD and Dollar Index corrections. More to come or is that it?

Forex 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  After two months one way trends EURUSD, GBPUSD and Dollar Index are in correction mode. All retraced 0.382 of the last leg. Was that it or is there more in the cards?
EURUSD could move to 1.0760
GBPUSD to 1.2475?
Dollar Index to 104?

EURUSD has retraced 0.382 of the last leg down since early September and is testing upper falling trendline in the falling channel and strong resistance at around 1.0635. That level was also the strong support back in September and is now a very strong resistance level

EURUSD needs to close above for further upside potential to the 0.618 of the last leg down since September and the 0.328 retracement of the entire downtrend since July around 1.0762.
That level was also the strong support back in August and is now a very strong resistance level

If EURUSD is failing to closed above 1.0635 it could slide back lower towards this month's lows below 1.05

RSI is could be key here, divergence end-September strongly indicated a correction. That correction is now ongoing question is how high can it go.

RSI is still showing negative sentiment – needs to close above 60 threshold to reverse to positive - but an EURUSD close above 1.0635 could be good indication RSI will break back above 60

Source all charts and data: Saxo Group

GBPUSD rebound seems to be stalling at the 0.382 retracement around 1.23

However, RSI divergence is indicating GBPUSD to rebound higher. A move to the 0.618 retracement of the last leg down since early September at 1.2475 is in the cards. Next couple of days are likely to be decisive for GBPUSD.

If GBPUSD is sliding back below its declining 21 Moving Average sellers could regain strength and push GBPUS towards 1.20

Dollar Index is testing key support at around 105.34. A close below is likely to initiate a larger sell-off down to the 0.618 retracement of the last leg up since September and strong support at around 104.39.

A dip down to the 0.382 retracement of the entire uptrend at around 104.06 should not be ruled out.

RSI divergence is supporting the correction picture.

If Dollar Index bounces back to close above the rising trendline the bullish trend could get its second wind higher towards 107.90

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