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EUR/USD - Bullish doji reversal?

  • Friday's doji candle indicates indecision/bearish exhaustion.
  • Positive follow-through today would confirm the bullish doji reversal.
  • Focus on the Fed and the ECB.

Friday's doji candle on the EUR/USD and the failure on the part of the bears to keep the spot below 50-day MA signals the bearish move from the recent high of 1.1961 may have run out of steam.

Still, it is too early to call a bottom as only a positive follow-through today (close above the ascending 100-day MA of 1.1801) would confirm the bullish doji reversal.

Focus on central banks

While a confirmation of the bullish doji reversal would be good news, still FX strategists call for caution. Kathy Lien from BK Asset Management says, "despite improvements in the labor market, manufacturing, and service sector activity, we don't expect the central bank to change their views and a reminder of their dovish stance could extend the slide in EUR/USD below 1.17, or have little impact on the currency."

That said, the spot may find bids as the USD could fall on the rate hike announcement, giving investors the opportunity to buy at lower levels. Also, EUR's trajectory could be influenced by the German Zew survey and Eurozone PMIs.

EUR/USD Technical Outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "technically, the EUR/USD pair is at risk of falling further, given that in the daily chart it settled below its 20 and 100 DMAs, whilst technical indicators entered the negative territory, maintaining their bearish momentum. Furthermore, the pair broke below the 61.8% retracement of its previous weekly advance, which converges with the mentioned 100 DMA at 1.1800, becoming the immediate resistance. Shorter term, the upward potential also seems limited, as in the 4 hours chart, the price settled below a bearish 20 SMA, while technical indicators managed to correct oversold conditions before losing strength upward, still within the negative territory. The key support is November 21st low at 1.1712, with a break below it favoring a test of the strong static support at 1.1660."

Support levels: 1.1750 1.1710 1.1660

Resistance levels: 1.1800 1.1830 1.1860

 

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