EUR/USD fades spike to 3-year high after inside day doji candle

EUR fades spike to a fresh 3-year high of 1.2323.
Inside day doji candle indicates bull market exhaustion/indecision in the marketplace.
German political uncertainty, dovish talk from the ECB could hurt the EUR.

Omkar Godbole FXStreet Contributor

The EUR/USD rose to a fresh three-year high of 1.2323 a few minutes ago only to fall back below 1.23 levels, indicating the overbought technical conditions are likely coming into play.

The failure to hold above 1.23 levels adds credence to bull market exhaustion shown by yesterdays inside day doji candle. A close today below 1.2195 would confirm bearish doji/bearish inside day candle reversal and could yield a deeper pullback in the EUR/USD in the short-term.

A 100-pip drop from the current level of 1.2290 cannot be ruled out, given the European Central Bank is unlikely to ditch a pledge to keep buying bonds at next week's meeting. Three sources close to the matter told Reuters that rate-setters need more time to assess the Euro exchange rate and an outlook for the economy. Also, In an interview published late on Tuesday, Bundesbank head and ECB's Governing Council member, Jens Weidmann, seemed to rule out a rate hike this year.

Further, the uncertainty surrounding the German Chancellor Merkel's ability to form a coalition government could also become a reason for the technical pullback in EUR/USD.

That said, the dips could be short-lived unless there is a sudden and significant rise in the 10-year US-German bond yield spread.

EUR/USD Technical Levels

A move above 1.2323 (Asian session high, 3-year high) would open doors in 1.2377 (161.8% Fib extension of the November low-high-December low) and 1.24 levels (zero levels). On the downside, a break below 1.2254 (session low) could yield pullback 1.2209 (5-day MA) and 1.2195 (previous day's low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	High
1H	Bullish	Overbought	Expanding
4H	Bullish	Neutral	Low
1D	Bullish	Overbought	High
1W		Overbought	Shrinking
Updated Jan 17, 01:45 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD remains heavy near 1.1600 after hot EU inflation data

EUR/USD remains heavily offered near 1.1600, six-week lows, in the European session on Tuesday. The pair fails to find any inspiration from a surprise pick up in Eurozone inflation for February, as the US Dollar continues to attract safe haven flows amid escalating geopolitical tensions in the Middle East.

GBP/USD attacks 1.3300, refreshing three-month lows

GBP/USD is deep in the red near 1.3300, accelerating its downside to renew three-month lows in European trading on Tuesday. The ongoing escalation in the Iran war, combined with rising Oil prices, weighs negatively on the higher-yielding Pound Sterling as the US Dollar capitalizes on increased haven demand.

Gold falls below $5,300 as stronger USD counter Middle East woes

Gold attracts some intraday selling and falls below $5,300 on Tuesday. The US Dollar climbs to a fresh high since January 20 and turns out to be a key factor exerting downward pressure on the commodity. However, concerns about a broader regional conflict in the Middle East continue to weigh on investors' sentiment and underpin demand for the traditional safe-haven bullion.

Stellar risks deeper losses as derivatives metrics turn negative

Stellar is trading red below $0.16 at the time of writing on Tuesday, after a slight recovery the previous day. Weakening derivatives data caps the recovery, while an unfavorable technical outlook projects a deeper correction for the XLM token in the upcoming days.

Middle East conflict ramps up a gear as energy price spike rips through markets

It’s another risk off day as geopolitical headwinds continue to batter financial markets. Although markets calmed during the US session and US stocks managed to post gains on Monday, this has not fed through to the European session, and stocks and bonds are sharply lower for a second day.

Hyperliquid Price Forecast: HYPE rises on commodities demand amid US-Iran war

Hyperliquid (HYPE) steadies above $33 at press time on Tuesday, marking its fourth consecutive day of recovery in a broadly volatile market due to the ongoing US-Israel strikes on Iran.