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Forex Strategy: EUR/USD Evening Star Warns Of Significant Correction

Forex Strategy: EUR/USD Evening Star Warns Of Significant Correction

David de Ferranti, Currency Analyst

Talking Points

  • EUR/USD Technical Strategy: Shorts Preferred
  • Evening Star pattern on the weekly chart warns of declines but awaits confirmation
  • Intraday gains may be limited with Inverted Hammer seeing little follow-through

The emergence of a second Hanging Man candlestick formation on the daily suggests that EUR/USD may come under renewed selling pressure. The bearish reversal pattern is made more noteworthy by its appearance near former support-turned-resistance at 1.3832. Fresh declines for the pair are likely to be met by buying support near the 1.3765 mark.

EUR/USD: Bears Emerge Following Hanging Man

Forex-Strategy-EURUSD-Evening-Star-Warns-Of-Significant-Correction_body_Picture_3.png, Forex Strategy: EUR/USD Evening Star Warns Of Significant Correction

Daily Chart - Created Using FXCM Marketscope 2.0

Drilling down to the four hour chart; an InvertedHammer formation has warned of an intraday bounce for EUR/USD. However follow-through has been limited, which suggests the signal may have been overlooked by traders given noteworthy resistance at 1.3805 is hanging nearby.

EUR/USD: Inverted Hammer Sees Lackluster response

Forex-Strategy-EURUSD-Evening-Star-Warns-Of-Significant-Correction_body_Picture_2.png, Forex Strategy: EUR/USD Evening Star Warns Of Significant Correction

4 Hour Chart - Created Using FXCM Marketscope 2.0

Finally, taking a look at some broader context provided the weekly chart; the Evening Star formation that has emerged shy of the key 1.4000 is a notable warning signal of further declines ahead. Confirmation of the bearish reversal pattern would raise the likelihood of a correction towards the 1.3480 support level.

EUR/USD: Evening Star Awaits Confirmation

Forex-Strategy-EURUSD-Evening-Star-Warns-Of-Significant-Correction_body_Picture_1.png, Forex Strategy: EUR/USD Evening Star Warns Of Significant Correction

Weekly Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

Follow David on Twitter: @Davidde

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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