EUR/USD: Bullish outside day needs strong follow-through, focus on risk sentiment
- Risk-on in equities likely put a bid under the EUR yesterday.
- EUR/USD aborted the immediate bearish setup by creating a bullish outside candle yesterday.
A close above 1.1340 would confirm bull reversal, although the breakout may not happen if equities turn risk-averse.
EUR/USD jumped 0.43 percent yesterday, engulfing the previous day's high and low, as rising hopes of breakthrough US-China trade deal boosted risk appetite and weakened demand for the greenback.
Essentially, the pair created a bullish outside reversal candle yesterday, aborting the immediate bearish view. A short-term bull reversal, however, would be confirmed only if the spot closes today above 1.1340 (previous day's high).
As of writing, the EUR/USD pair is trading at 1.1339. Meanwhile, DAX futures are indicating that the index could add 16 points or 0.15 percent at the open. The CAC and FTSE futures are also reporting 0.83 percent and 0.16 percent gains, respectively. Across the pond, the futures on the S&P 500 are up 0.30 percent.
With equities looking to extend risk-on, the Eurozone recession fears will likely take a back set for the second day, allowing the pair to confirm bull reversal with a close above 1.1340.
That breakout, however, may remain elusive if equities turn risk-off and Eurozone December industrial production prints below estimates, boosting fears of a deeper slowdown across the 17-nation bloc.
EUR/USD pivot points
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
