EUR/USD - Bullish outside day, crowding out weak bears?

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.

Omkar Godbole FXStreet Contributor

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).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M		Neutral	Expanding
1H		Overbought	Expanding
4H	Bullish	Overbought	Shrinking
1D	Bearish	Neutral	Shrinking
1W	Bullish	Neutral	High
Updated Mar 2, 04:15 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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