EURUSD Downtrend Correction To 1.1600 Trend Line

EURUSD has been trending lower beneath a descending trend line, confirming that the selloff is gaining traction. Price is currently hovering around 1.1544, not far above the swing low near the 1.1500 major psychological support.

However, price appears to be staging a modest recovery from those lows, and the Fibonacci retracement tool highlights where sellers could be waiting to hop back in on any corrective bounce.

The 38.2% Fib is at 1.1574, which could attract some bearish interest. A slightly larger pullback could reach the 50% level at 1.1596, while a more extended correction might test the 61.8% Fib at 1.1619. The 100% Fib level sits much higher at 1.1691, which also lines up with the descending trend line resistance and moving average cluster overhead.

On the moving averages front, the 100 SMA has crossed below the 200 SMA to confirm that the path of least resistance is to the downside and that the selloff is more likely to resume than to reverse. Both indicators are sloping lower and converging with the descending trend line resistance, adding an extra layer of supply to any attempted rally.

Stochastic has bounced from the oversold zone and is now heading higher, suggesting that buyers are attempting a short-term recovery. The oscillator has plenty of room to climb before reaching overbought levels, which means the corrective bounce could have some legs before sellers regain the upper hand.

RSI is similarly ticking higher from near oversold territory, reinforcing the case for a brief pullback toward the Fibonacci retracement levels. If any of these Fibs manage to cap gains, EURUSD could resume its slide back toward the swing low at 1.1500 or even lower.

EURUSD could take cues from the upcoming US CPI release, as another strong print could cement Fed tightening expectations in the near-term and trigger another wave higher for the dollar. The ECB decision is also lined up this week, though a rate hike and hawkish commentary could drive the shared currency further up.