EUR/USD is reaching the critical 1.2050/60 level after benefiting from dollar weakness, but there are possible rejection and a fresh downfall.

EUR/USD jumped 0.73% on Friday, engulfing the preceding day's high and low and forming a bullish engulfing candle on the daily chart. If appearing after a prolonged sell-off, the bullish outside day is considered an early warning of a reversal higher.

However, the trend change is confirmed if the follow-through is positive, that is, EUR/USD above Friday's high. The pair needs to end Monday above Friday's high of 1.2050 to confirm a bearish-to-bullish trend change. The immediate bias is neutral, with the pair trading near 1.2045.

Looking down, support awaits at 1.20, which is a psychologically significant level and was a cushion in early February. The fresh 2021 trough of 1.1950 is the next level to watch.

Above 1.2060, the next cap is at 1.2090, which was held down last week. It is followed by 1.2130, 1.2160, and finally 1.2190, the mid-January top.