EUR/USD: downside exposed after bearish outside-day

EUR/USD charted bearish outside candle yesterday, courtesy of Brexit vote and ECB's dovish turn.
The candlestick pattern signals the continuation of the sell-off from the recent high of 1.1570.
Political uncertainty in the UK could add to the bearish pressures around the EUR/USD.

Omkar Godbole FXStreet Contributor

The EUR/USD pair created a bearish de reversal candle yesterday - price action engulfed Monday's high and low - signaling a continuation of the sell-off from the recent high of 1.1570.

Moreover, the common currency tracked the British pound lower. The GBP/USD took a beating after Prime Minister May's Brexit deal was voted down by parliament. The drop to 1.2668, however, was short-lived - the currency pair recovered lost ground to close largely unchanged on the day at 1.2859.

The EUR, however, did not follow suit, possibly due to dovish turn by the European Central Bank's (ECB) Draghi. The central bank head warned lawmakers that the Eurozone economy is weaker-than-expected.

Draghi's dovish comments will likely keep the EUR under pressure today. Further, a stronger pullback in CNH (rally in USD/CNH) could lead to broad-based USD strength.

Also, heightened political uncertainty in the UK could weigh over both the GBP/USD and the EUR/USD. Moreover, a no-confidence vote against PM May's government will be held later today and, if parliament decides that it does not want the government to carry on, then it could lead to general elections.

All-in-all, the path of least resistance in the EUR/USD pair is to the downside. The bearish setup would be negated above the previous day's high of 1.1490.

EUR/USD Technical Levels

EUR/USD

Overview:
    Today Last Price: 1.1407
    Today Daily change: -6.0 pips
    Today Daily change %: -0.0526%
    Today Daily Open: 1.1413
Trends:
    Previous Daily SMA20: 1.1432
    Previous Daily SMA50: 1.1385
    Previous Daily SMA100: 1.1471
    Previous Daily SMA200: 1.1619
Levels:
    Previous Daily High: 1.1491
    Previous Daily Low: 1.1382
    Previous Weekly High: 1.1571
    Previous Weekly Low: 1.1396
    Previous Monthly High: 1.1486
    Previous Monthly Low: 1.1269
    Previous Daily Fibonacci 38.2%: 1.1424
    Previous Daily Fibonacci 61.8%: 1.145
    Previous Daily Pivot Point S1: 1.1366
    Previous Daily Pivot Point S2: 1.1319
    Previous Daily Pivot Point S3: 1.1257
    Previous Daily Pivot Point R1: 1.1476
    Previous Daily Pivot Point R2: 1.1538
    Previous Daily Pivot Point R3: 1.1585

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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