A quick look around
The dollar rise is stalling a bit. The USDJPY traded up to a resistance area. The EURUSD got within 5-6 pips of a triple bottom on the daily chart. Nice levels to find profit taking.
Now what?
In a trend move it is hard to pick up and reverse the other way. The price trended for a reason today and there was likely traders getting off side along the way.
As a result, corrections can be used to get out of bad positions or to hop on the trend for a potential continuation.
How do you know it is only temporary? Well, you look for targets and gauge the price action against tools and "old levels".
Here is how I see the corrections vs the USDJPY and the EURUSD.
USDJPY.
The USDJPY got close to a topside trend line at the 113.00 level. Since then, the price action has turned a bit more neutral with the price moving back down to the old trend line at the 112.50 level.
Drilling down to the 5-minute chart, the corrective move has stalled at the prior swing high at 112.46-48 level. There is some profit taking, but are there shorts still out there who are happy to buy the dip and/or dip buyers getting on the trend? The corrective low near the 112.50 level s is where you would visually expect to see buyers (it was highs and a break point on the 5 minute chart below as well). If traders can get on a trend on a correction, that is a level that is a low risk area to lean against on a dip. A move below would muddy that idea with the 112.15 level the next target.
EURUSD.
The EURUSD got within 5-6 pips of a triple bottom on the daily chart....
That has been the catalyst for some profit taking/new buying.
Where has the correction taken us?
Looking at the 5 minute chart, the corrective move higher moved above swing levels (intraday) at 1.0540 area (see red circles in the chart below). The move above that level moved above the next swing area at the 1.0560 but that break failed before the 38.2% of the trend move lower. A failure above. A failure below. With the trend down, the buyers need to prove the sellers wrong.
The price action muddies the water for the trend - especially after stalling at key levels in both the USDJPY and the EURUSD. The trend may have slowed, but it may not be over for the day. Watch the levels outlined above for the technical clues that show who is in control and who is feeling the pain.