EUR/USD has managed to take out a strong dynamic resistance signaling further growth. The perspective is bullish after the failure to stabilize under 1.18 psychological level. Unfortunately, the greenback drops even if the United States inflation data comes in better than expected on Friday.

USDX's potential deeper drop could send EUR/USD higher in the short term. You can use the dollar index as a leading indicator. When the index drops, EUR/USD grows, and when USDX increases, the pair drops.

EUR/USD jumped and closed above the first warning line (wl1) signaling strong buyers. A valid breakout above the R1 (1.1924), another higher high, suggests buying as the rate should approach and reach at least the 1.2 psychological level.

Only another drop below 1.18 could invalidate the upside scenario and could announce a down reversal.

• EUR/USD Trading Tips

Buy a bullish closure above the R1 (1.1924) level with a potential upside target at the R3 (1.2088) level.

If you are a seller, wait for a bearish closure below the S1 (1.1759) before going short. The current breakout above the warning line (wl1) could be invalidated by a strong bearish movement followed by a drop below the Pivot Point (1.1838) level.

Technically, only a valid breakdown below 1.17 could really confirm a reversal and fresh selling signal.