Forex Strategy: EUR/USD Dips Post Bearish Engulfing Pattern
- EUR/USD Technical Strategy: Sidelines Preferred
- Bearish Engulfing pattern helped foreshadow declines near 1.3800
- Evening Starcandlestick formation on the weekly offers warning signal
The EUR/USD bulls have lost their grip on prices following a test of the key 1.3800 handle in recent trade. While the Hammer formation on the daily had suggested a potential run on the 1.3840 mark, given the fading upside momentum for the pair, fresh gains may be limited.
Traders should note the potential for the upcoming ECB rate decision to prompt price action that could negate some of the technical signals offered. The event is listed on the economic calendar here.
EUR/USD: Falters At 1.3800 As Bulls Lose Steam
Daily Chart - Created Using FXCM Marketscope 2.0
As noted in yesterday’s candlesticks report, the Bearish Engulfing formation near 1.3805 spelled weakness ahead for EUR/USD. With buyers supporting prices at the 1.3750 mark in intraday trade, further declines may be limited, while a bullish reversal pattern would suggest a bounce.
EUR/USD: 1.3750 In Focus During Intraday Trade
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
Weekly Chart - Created Using FXCM Marketscope 2.0
By David de Ferranti, Market Analyst, FXCM
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.