- EUR/USD created a bearish outside day on Wednesday despite weak US inflation data.
- A close below 1.1283 would validate the bearish outside day candle.
- A bearish daily close could be seen if Eurozone's industrial production data prints below estimates.
With a bearish candlestick pattern on the daily chart, the EUR/USD is on the defensive ahead of Eurozone's industrial production release.
The currency pair created a bearish outside day on Wednesday – a candlestick pattern which occurs when a particular day's price action falls outside the preceding day's trading range.
EUR/USD clocked a high and low of 1.1343 and 1.1283 on Wednesday, engulfing Tuesday's high and low of 1.1338 and 1.1301.
Put simply, the bearish outside day indicates the day began with optimism, but ended on a pessimistic note and is widely considered an early sign of bearish reversal, especially when it appears after notable gains or near key resistance.
In EUR's case, the outside day has appeared following a rally from 1.1116 and 1.1348. That said, the bearish reversal would be confirmed only if the spot closes today below the candle's low of 1.1283.
The pair will likely find acceptance below 1.1283 if the Eurozone data, due at 09:00 GMT today, shows a bigger-than-expected drop in industrial production in April. The factory gauge is forecasted to have contracted by 0.5% month-on-month.
The EUR may pick up a bid if the data prints above estimates, however, a close above 1.1343 (bearish outside day's high) is needed to revive the short-term bullish outlook.
That said, with growing calls for a drop in China's Yuan beyond 7 per US Dollar, the EUR bulls will likely have a tough time forcing a bullish close above 1.1343.
Also, markets are in no mood to sell US Dollars. This is evident from the fact that the EUR/USD carved out a bearish candle on Wednesday despite the weaker-than-expected US inflation number and rising odds of Fed rate cuts.
As of writing, EUR/USD is trading largely unchanged on the day at 1.1293.