- EUR created bullish outside day candle yesterday.
- Has moved back above the double top neckline.
- The EUR could be crowding out weak bears, but downside limited.
EUR/USD staged a solid rebound from 1.2173 (38.2% Fib R of 1.1554- 1.2556) yesterday and rose to 1.2773, engulfing the previous day's high and low.
As of writing, the spot is trading on the front foot at 1.2287, meaning the pair has moved back above the double bottom neckline of 1.2206 (Feb. 9 low) in a convincing manner, trapping the bears on the wrong side of the trade.
However, currency pairs often shake out weak hands immediately after a bullish/bearish breakout. Further, the daily relative strength index (RSI) remains below 50.00 (in the bearish territory) and the 5-day moving average (MA) and 10-day MA are trending lower, indicating a short-term bearish setup. So, it could be said that EUR is crowding out weak bears.
That said, the EUR is backed by Eurozone current account surplus and hence will have an edge over the US dollar if trade wars escalate. So, the downside scope in the EUR is limited.
EUR/USD Technical Levels
A daily close above 1.2355 would add credence to the bullish outside day candle and open doors for 1.2402 (61.8% Fib R of 1.2556-1.2154). A violation there would expose the recent high of 1.2556. On the downside, a move below 1.2154 (previous day's low) could yield a sell-off to 1.2089 (Jan. 4 high) and 1.2055 (50% Fib R of 1.1554-1.2556).
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