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EUR/USDReady to resume ascent?Last week, we noted EURUSD price action had presented an inverted hammer candlestick, signaling a possible bearish reversal. That view has now been confirmed - the pair tumbled the following day. Our entry below 1.5800 yielded over 500 pips in profit, though our profit target of 1.5320 was narrowly missed by 20 pips (EURUSD reached a low of 1.5340 last week).Having completed the expected retracement, we now find the EURUSD at trend line support, with a Hammer reversal pattern waiting to be confirmed by a bullish candle. If that materializes, we will look for the bullish trend to resume. Those traders that have not taken profit on our suggested short position should do so here. With the long term bias still favoring the upside, we will re-enter long at trend line support with a tight stop in place should the pair break down further. Our initial profit target will eye the top of the most recent bullish run to 1.5740. However, we will keep a close eye on the pair’s momentum and adjust the profit target contingent with the price action.

EUR/USD Trading Strategy

1. If the Hammer formation is confirmed with a bullish candle, long EURUSD near 1.5380 (trend line support).

2. Set stop near 1.5270, just below the wick low of the 03/06-03/09 consolidation.

3. Set the initial profit target just below 1.5740, giving a favorable risk-reward ratio (risking 110 pips to gain 360).