ER/USD peeps above 1.22 handle despite bearish outside day

• EUR/USD rebounds from 38.2% Fib, retakes 1.22 handle.
• Bearish outside day reversal to cap gains?

The EUR/USD found bids around 1.2167 (38.2% Fib R of Sep. 9 low-Sep. 17 high) and jumped to a high of 1.2209 levels, suggesting strong buying interesting on dips.

However, the spot is still at least 110 pips from the three-year high of 1.2323 set yesterday. Also, EUR/USD created a bearish outside day reversal yesterday. Commerzbank Analyst Karen Jones believes it could yield a temporary pullback to 1.2125-1.2075.

Also, the markets may have overpriced (run ahead of themselves) near-term policy tightening by the ECB. ING says President Draghi is likely to convey a rather dovish message, pointing to still weak inflationary pressure and also emphasizing the disinflationary impact from a stronger euro.

Most experts seem to agree that Draghi is likely to tame the hawks at the ECB. Thus, EUR bulls could have a tough time taking the pair back to a three-year high of 1.2323.

As of writing, the currency pair is trading at 1.2202 levels. Across the pond, weekly jobless claims and housing data (building permits and housing starts) are scheduled for release.

EUR/USD Technical Levels

A move above the upward sloping 5-day MA of 1.2222 would open doors for 1.2283 (Tuesday's doji candle high) and 1.23 (zero levels). On the downside, breach of support at 1.2167 (38.2% Fib R) could yield a pullback to 1.2119 (50% Fib R) and 1.2102 (10-day MA).