EUR / USD rose on Tuesday, maintaining a recent bias toward dip-buying recoveries that might nudge it toward resistance near 1.2000 area, but the outlook after that is cloudy.
Upbeat risk sentiment and a drop in U.S. interest rates drove investors out of the safe-haven dollar and into riskier bets like stocks, commodities, emerging markets currencies and the euro, propelling EUR / USD to a 9-session high.
The rally has made option investors a bit wary of EUR / USD upside. Risk reversals show vol premiums for calls slightly exceed those for puts which suggests EUR / USD could slowly grind higher
But, formidable resistance resides near the 1.2000 / 50 zone, including a series of recent monthly and daily highs and lows as well as the 55-day moving average and 50% Fibo retracement of the 1.2349-1.1704 decline.
If EUR / USD tests that resistance but fails to break it, the right shoulder of a large head-and-shoulders top would develop, which could foreshadow a retreat that breaks support near 1.1600 and even 1.1200.
