EUR/USD Might Be at the Start of a Minor Correction Lower

EUR/USD Forecast Video for 18.01.23 by Bruce Powers

EUR/USD continues to trade in a low volatility environment yet leans towards the bearish side. It fell to a three-day low on Tuesday and is looking like the session will end with the pair closing in the lower third of the day’s range, which is short-term bearish.

Overall, the EUR/USD have been moving higher within a parallel trend channel with the advance stalling out the past few days. It reached a new trend high of 1.0874 on Monday, but momentum quickly turned to the downside. There is now a good chance a deeper short-term correction may be starting.

Bearish Indications – Short-term

The next bearish indication is given if the EUR/USD ends Tuesday below Monday’s low, and then on a drop below Tuesday’s 1.0774 low. At that point, if it occurs, the pair will likely complete at least a 38.2% Fibonacci retracement of the short-term uptrend at 1.0725. The 50% retracement is at 1.0679. Note that if the 50% retracement is reached, price will also be hitting potential support of the lower upward line. That would be a great spot for a bullish reversal signal in the EUR/USD. The 34-Day EMA is also close by the line at 1.0607.

Signs of Strengthening

Alternatively, price strengthens instead of weakening further. Unfortunately, there is not a good setup currently to look to buy on strength other than a rally to new highs. That type of entry though is relatively high risk, as new trend highs frequently fail at first. Nevertheless, signs of strength are indicated on a move above 1.0869 and then on a rally above 1.0874, Tuesday and Monday’s highs respectively.

Short-term Correction Provides Opportunity

If the correction does deepen, then the next bullish reversal off support should provide great reward to risk. This is because the larger trend is bullish, and it will continue to be so if the pair doesn’t drop below the most recent swing low of 1.0482.

Higher targets are at the 50% retracement of the downtrend at 1.0942, followed by a 78.6% retracement of the internal downtrend at 1.1075. Nevertheless, there is some indication that the EUR/USD could eventually get as high as 1.1274, as that would complete a 61.8% Fibonacci retracement of the downtrend that began off the January 1, 2021, swing high.

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