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EUR/USD Has Another Bullish Leg

The EUR/USD has another bullish leg in the making as it held above 1.1320 to start the week. Today (2/17) we had ZEW economic sentiment data for Germany and the Eurozone. Both readings improved for the 4th consecutive month. Surely this has to do with falling energy prices, but it also has to do with the anticipation and eventually delivery of QE.

EUR/USD 1H Chart 2/17
(click to enlarge)

The EUR/USD rallied after the economic sentiment data pushing to 1.1440 before stalling. Then, after a retreat to about 1.1380 , a previous support pivot, the EUR/USD held. Note that in the 1H chart, that the pair is holding above the 200-, 100-, and 50-hour SMAs. This represents some bullish bias along with the fact that the RSI has hit 70 and is holding above 40 so far. Even if price comes down to 1.1370, the market still has bullish structure. A break below 1.1350, with the RSI back below 40 however should invalidate the bullish outlook.

EUR/USD Daily Chart 2/17
(click to enlarge)

If the current rally extends, we can see that the next key area to monitor for resistance will be around 1.16-1.1650, which represents common price of a previous consolidation. Above that, the 1.1750-1.18 includes a previous consolidation support and the 50-day SMA. Because the prevailing trend is bearish, and the fundamentals still favor the USD to the EUR, we should limit the bullish outlook to 1.18, with a conservative outlook to 1.1650.