Talking Points

  • EUR/USD Technical Strategy: Shorts Preferred
  • Recovery may be limited as reversal signal lacking
  • Evening Starformation on the weekly offers ominous warning

EUR/USD is recovering some lost ground in early European trading. However, the absence of a bullish reversal signal casts doubt over the potential for further gains. Additionally, the sustained presence of a short-term downtrend on the daily, signified by a series of lower highs and lower lows, suggests a bounce may prove short-lived.

EUR/USD: Recovery Limited In Context of Downtrend

Forex-Strategy-EURUSD-Bounce-Limited-With-Reversal-Signal-Absent_body_Picture_3.png, Forex Strategy: EUR/USD Bounce Limited With Reversal Signal Absent

Daily Chart - Created Using FXCM Marketscope 2.0

After hinting at a break below the 1.3700 handle in intraday trade, the bulls have managed to regain control of prices for the time-being. However, again a reversal signal is notably lacking on the four hour chart which calls into question the potential for further gains. Sellers are likely to emerge near former support-turned-resistance at 1.3750.

EUR/USD: Bullish Reversal Signal Lacking

Forex-Strategy-EURUSD-Bounce-Limited-With-Reversal-Signal-Absent_body_Picture_2.png, Forex Strategy: EUR/USD Bounce Limited With Reversal Signal Absent

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-Bounce-Limited-With-Reversal-Signal-Absent_body_Picture_1.png, Forex Strategy: EUR/USD Bounce Limited With Reversal Signal Absent

Weekly Chart - Created Using FXCM Marketscope 2.0

By David de Ferranti, Market Analyst, FXCM

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