Despite having touched its highest level since April above 1.0900 at the beginning of the week, EUR/USD has struggled to gather further bullish momentum. The Federal Reserve (Fed) and the European Central Bank's (ECB) policy meetings next week could trigger the next directional move in the pair.

EUR/USD dropped toward the lower limit of the ascending regression channel coming from early October but managed to stay within it. Additionally, the Relative Strength Index (RSI) indicator on the daily chart holds comfortably above 50 and the pair trades above the 20-day SMA, suggesting that the latest pullback is a technical correction rather than the beginning of a reversal.

On the upside, interim resistance seems to have formed at 1.0930 (static level). Above that level, 1.1000 (psychological level, mid-point of the ascending channel) aligns as the next hurdle before the pair could target 1.1150 (upper limit of the channel).

In case EUR/USD makes a daily close below 1.0850 (lower-limit of the channel), it could extend its correction toward 1.0800 (psychological level, 20-day SMA) and 1.0630 (50-day SMA).

Indeed, the continuation of the uptrend now needs to rapidly clear the 2023 high at 1.0929 (January 26) to allow for a test of the weekly top at 1.0936 (April 21 2022). A sustainable break above this level could pave the way for a challenge of the key barrier at 1.1000 the figure sooner rather than later.

In the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0309.

EURUSD seems to be creating a running flat correction

Jan 27 2023