EURUSD saw a fairly dramatic reversal late in 2022 when it turned out that the energy crisis in Europe was softer than feared. The pair was trading close to 0.95 at the end of September but has rallied all the way to 1.10 since then. Could it be primed for a larger correction?
When looking at the D1 interval one can spot a nearly completed 5- wave structure. The current wave runs along the upwards corridor and while we saw 2023 highs last week, the pair currently tests the lower limit of the channel. A breakout lower could therefore result not just in profit taking but possibly in a larger ABC corrective structure. One should be vigilant for a larger move amid reduced volatility during the Labour Day.
A breakout lower – should it occur – could be a warning signal for other markets as well as the EURUSD rally accompanied gains on other risk-on markets, especially European equities. With DE30 at the highest since January 2022 and not too far off ATH the stakes are high.
Should the pair break lower out of the channel, a larger corrective structure could be initiated.
