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Forex Strategy: EUR/USD Hammer Hints At Bounce But Awaits Confirmation

Forex Strategy: EUR/USD Hammer Hints At Bounce But Awaits Confirmation

2014-03-31 10:57:00
David de Ferranti, Currency Analyst

Talking Points

  • EUR/USD Technical Strategy: Shorts Preferred
  • Hammer formation may offer bullish reversal signal, but awaits confirmation
  • Evening Star pattern on the weekly chart warns of significant correction

A Hammer candlestick pattern on the daily chart has emerged for EUR/USD following a bounce off key support at 1.3700. While considered a bullish reversal signal we are yet to see confirmation from a second successive up-day. This leaves the technical bias to the downside, particularly given the notable selling pressure around the 1.3770 mark (38.2% Fib Retracement level).

EUR/USD: Hammer Awaits Confirmation

Forex-Strategy-EURUSD-Hammer-Hints-At-Bounce-But-Awaits-Confirmation_body_Picture_3.png, Forex Strategy: EUR/USD Hammer Hints At Bounce But Awaits Confirmation

Daily Chart - Created Using FXCM Marketscope 2.0

Drilling down to the four hour chart; the presence of a Dragonfly Doji near 1.3750 suggested some indecision amongst the Euro bulls in Asian trading today alongside some choppy price action. The absence of a clearer bearish reversal signal obfuscates a technical bias in the shorter-term.

EUR/USD: Dragonfly Doji Suggests Hesitation Amongst Bulls

Forex-Strategy-EURUSD-Hammer-Hints-At-Bounce-But-Awaits-Confirmation_body_Picture_2.png, Forex Strategy: EUR/USD Hammer Hints At Bounce But Awaits Confirmation

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. The pattern has received confirmation from a successive down week which raises the likelihood of an eventual correction towards the 1.3480 support level.

EUR/USD: Evening Star Receives Confirmation

Forex-Strategy-EURUSD-Hammer-Hints-At-Bounce-But-Awaits-Confirmation_body_Picture_1.png, Forex Strategy: EUR/USD Hammer Hints At Bounce But Awaits Confirmation

Weekly Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

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