Profit-taking or a correction towards a sharp rise in EUR/USD during the last several weeks is moving forward at a steady gait. At the beginning of this week, a formal reason for that could well be the speculations on the subject that speculators have already discounted a possible expansion of the QE easing program in US by $0.5-$1 trillion. Someone believes that a certain driver for dollar’s rise could be the speeches of the Federal Reserve Banks’ Presidents Dennis Lockhart and Charles Evans who insist that QE2 is not that necessary and that the second round of quantitative easing will have a very limited positive effect on the US economy.
A formal target for correction in EUR/USD may be the 1.36 support level which is a 38.2% Fibonacci Retracement between 1.2640 and 1.4150.
We believe that all that is happening in EUR/USD is just a correction, rather than a trend change because we haven’t yet received any clear signals from the Fed that the downtrend on the US dollar has exhausted itself.