Technical Update - EURUSD and Dollar Index ripe for a correction. Maybe a larger one Technical Update - EURUSD and Dollar Index ripe for a correction. Maybe a larger one Technical Update - EURUSD and Dollar Index ripe for a correction. Maybe a larger one

Technical Update - EURUSD and Dollar Index ripe for a correction. Maybe a larger one

Forex 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank Group

EURUSD is showing Bullish divergence i.e., price is price is falling but the RSI is slowly rising. A divergence indicates imbalance in the market and a weakening trend usually followed by a price reversal/correction. However, the divergence can also be “traded out” by a new lower low on the RSI. First indication of that scenario is if RSI breaks below its rising trendline.
However, if EURUSD closes above resistance at 1.01 it could challenge the medium-term falling (black) trendline and if that trendline is broken EURUSD could move to resistance at around 1.0370

Source: Saxo Group
In the less likely event that EURUSD closes above 1.0370 the medium-term falling trend has reversed with more upside potential to a round 1.078 which is 0.382 Fibonacci retracement of the bear move since Q3 2021.  RSI divergence also here on the Weekly chart indicates a correction scenario is likely to play out but the upside potential is likely to be limited.  

Source: Saxo Group

Reason for the likely limited upside is that the on the monthly chart the trend is still down and there is no divergence. However, RSI is nearing values close to 20, a value not seen in 7 years. This picture indicates a correction, but down trend could very well soon resume.
A likely scenario is a correction up to around 1.0250-1.0350 where the correction will exhaust and bear trend resumes.
If EURUSD breaks below 0.9860 next support is at around 0.96.

Source: Saxo Group

The Dollar Index has reached the 0.764 retracement of the 2000-2008 bearish trend and 1.382 projection of the 2020-2021 correction around 109.50. Could be time for a correction before higher levels. There is no RSI divergence on the monthly chart but if looking at the daily and weekly it is a different story

Source: Saxo Group

The Dollar Index is showing divergence on daily and weekly indicating a correction in the near future is likely. Possibly down to test the rising (black) trend line.

Source: Saxo Group

On the weekly the divergence is even more pronounced. RSI is currently testing its falling trend line. If closing above the trendline Dollar Index is likely to move to higher levels but if RSI is rejected a reversal is likely. A correction that could take the Dollar Index down to around 105. If closing below 104.50 the Index could drop to around 10.50-101.50.

Source: Saxo Group

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

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

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

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 Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML 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.

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 Markets 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.