EUR/USD Ready for a Major Correction? (May 22, 2013)

It’s just a few more pips away from the 38.2% Fibonacci retracement level, which could also act as resistance should the pair keep climbing in today’s trading sessions.

There are a bunch of market catalysts on tap, starting with the euro zone current account release and the German bond auction. Should these events turn out better than expected, EUR/USD could stay supported for the rest of the London session.

During the US session, the existing home sales report and FOMC meeting minutes will be printed. Around the same time, Fed Chairman Ben Bernanke is set to give a speech and possibly drop some hints on the Fed’s stimulus exit plan. In his previous speeches, Bernanke seems to be in no rush to withdraw quantitative easing and if he does highlight this bias in today’s testimony, the U.S. dollar could continue to sell off.

However, if the FOMC minutes show that majority of Fed officials support the tapering off of asset purchases as early as June, the dollar could regain ground.

Further dollar selling could take the pair up to the 1.3000 major psychological area, which is close to the 50% Fib and a former support level.

By Kate Curtis from Trader's Way