Forex Strategy: EUR/USD Bears Dominate As Bounce Looks Unlikely
- EUR/USD Technical Strategy: Shorts Preferred
- Bearish Engulfing pattern helped foreshadow declines near 1.3800
- Evening Starformation on the weekly offers ominous warning
The EUR/USD bears have taken control of price action as the pair teases at more significant correction below 1.3700. The probability of a bounce remains low at this stage, given a bullish signal is notably absent on the daily. Shorts are preferred with a target offered with an initial target offered by the next psychologically-significant level at 1.3600.
Traders should note that the monthly US NFPreport due in the coming hours is likely to spark significant volatility for EUR/USD which could negate technical signals offered. Details available on the economic calendar here.
EUR/USD: Eyes 1.3600 Following Break Below Key Support
Daily Chart - Created Using FXCM Marketscope 2.0
As noted in recent candlesticks reports, the Bearish Engulfing formation near 1.3805 spelled weakness ahead for EUR/USD. The absence of a bullish reversal signal in intraday trade casts doubt on the potential for a bounce as we push through prior support levels for the pair.
EUR/USD: Bullish Reversal Signal Lacking
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
Follow David on Twitter: @Davidde
To receive David’s analysis directly via email, please sign up here.