- EUR/USD created a bullish outside day on Friday – an early warning of a bullish reversal.
- A close above Friday’s high of 1.1153 is needed to confirm the trend change.
- The bullish close may remain elusive if German IFO data prints below estimates.
EUR/USD needs to close above Friday’s high of 1.1153 to confirm a short-term bullish reversal. The bullish close, however, will likely remain elusive if the German Ifo data prints below estimates amid escalating trade tensions.
Bearish outside day
EUR/USD jumped 0.53% on Friday, engulfing Thursday’s high and low. Essentially, the pair created a bullish outside day candle, which is widely considered an early warning of a potential bearish-to-bullish trend change.
The reversal, however, is confirmed only if there is a positive follow-through on the following day. Hence, a close above 1.1153 (outside candle’s high) is needed to confirm a bullish reversal.
The bulls, however, may have a tough time, forcing a break above 1.1153 due to escalating Sino-US trade tensions. On Friday, President Trump tweeted additional tariffs on China’s exports which will take effect from Sept. 1 and Oct. 1.
Focus on German IFO
The German IFO data scheduled for release at 08:00 GMT will provide insight into the latest thinking of German executives. Notably, the IFO – Business Climate (Aug) is forecasted to fall to 95.1 from July’s print of 95.7.
A below-forecast August reading would only bolster the German recession fears and weaken the prospect of the EUR closing above 1.1153 today.
A bullish close could happen if the IFO numbers blow past expectations and the US Durable Goods Orders (Jul) print well below estimates, validating the dovish Federal Reserve expectations. The central bank is already facing political pressure to embark on a full-blown easing cycle.
As of writing, the pair is trading at 1.1142, having hit a high of 1.1164 in the Asian session.
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Technical levels
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