The EUR/USD pair is in a corrective decline after peaking at 1.0929, its highest in almost two months. A dovish United States Federal Reserve triggered a US Dollar sell-off on Wednesday, which extended during Asian trading hours. EUR/USD extreme overbought conditions weighed on investors, who took some profits out of the table ahead of the Bank of England (BoE) monetary policy decision.

The BoE delivered as expected a 25 basis points (bps) rate hike but was read as hawkish, as the central bank noted that "if there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required," cooling hopes for an upcoming pause. The announcement hardly affected the FX board, with EUR/USD trading at around 1.0870 before and after the announcement.

The daily chart for the EUR/USD pair supports further advances as the pair continues reaching higher highs while posting higher lows since bottoming at 1.0515 on March 15. Furthermore, the pair extends its advance beyond bullish moving averages, with the 20 Simple Moving Average (SMA) gaining upward traction above the longer ones. Technical indicators, in the meantime, have turned flat within positive levels without signs of upward exhaustion.

In the near term, and according to the 4-hour chart, chances for the corrective decline to continue are limited. Indeed, technical indicators are easing from extreme overbought readings but without bearish strength and are still far above their midlines. At the same time, the 20 SMA heads firmly north, well above the longer ones, and above the critical Fibonacci support at 1.0745, the 61.8% retracement of the 2022 yearly decline.

EURUSD ready for a sell off

Mar 23 2023