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Monthly EURUSD Pullback Below Bull Microchannel

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Market Overview: EURUSD Forex

The market formed a monthly EURUSD pullback below bull microchannel in August. The bulls see the current move as a pullback and want it to have poor follow-through selling. The bears must create follow-through selling in August to increase the odds of a failed breakout.

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly - Buyers Below 7-Bar Bull MC, or FT Selling, Monthly EURUSD Pullback Below Bull Microchannel
  • The July monthly EURUSD candlestick was a bear bar closing near its low.
  • Last month, we said traders would see if the bulls could create another strong bull bar in July, or if the market would trade higher but stall around the bear trend line or the May 2021 high area, closing the candlestick with a long tail or a bear body instead.
  • The market traded slightly higher early in the month, but there was no follow-through buying following the strong bull bar in June.
  • Previously, the bulls had a breakout above the trading range with follow-through buying in June.
  • They want a strong breakout and a measured move based on the height of the trading range, which will take the market to the 2021 high area.
  • The move up (since Jan 13 low) was in a 6-bar bull microchannel. That means persistent buying.
  • There may be buyers below the first pullback from such a strong bull microchannel.
  • The bulls see the current move as a pullback and want it to have poor follow-through selling.
  • They want a retest of the recent leg extreme high (Jul 1), even if it only forms a lower high.
  • The bears see the rally as a bull leg and a buy vacuum test of the 2021 high.
  • They want the market to form a failed breakout followed by a retest of the middle of the trading range.
  • They want the bear trend line and the upper third of the multi-year trading range to be areas of resistance.
  • They want the market to form a major lower high (vs Jan 2021 high).
  • They must create follow-through selling in August to increase the odds of a failed breakout.
  • Since July was a bear bar closing near its low, the market could trade at least a little lower, which it has done.
  • The move up from the January 13 low was in a 6-bar bull micro channel. There could be buyers below the first pullback.
  • For now, traders will see if the bears can create a follow-through bear bar in August. If so, that would increase the odds of a failed breakout.
  • Or will the market form a retest of the July 1 high instead? If this is the case, it would indicate that the bears are not yet strong, and the market may still trade sideways to up.

The Weekly EURUSD chart

EURUSD Weekly - PB to 20-week EMA, DB Bull Flag
  • This week’s candlestick on the weekly EURUSD Forex chart was a big bear bar closing around the middle of its range with a long tail below.
  • Last week, we said traders would see if the bulls could create follow-through buying and a breakout above the July 1 high, or if the market would stall around the July 1 high area, which would increase the odds of a second leg sideways to down retesting the July 17 low.
  • The market formed a second leg sideways to down, retesting the 20-week EMA.
  • The bears see the recent move (Jul 1) as a bull leg and a buy vacuum test of the multi-year trading range high. They want the move to form a lower high (vs Jan 2021).
  • They want the upper third of the multi-year trading range, or the May 2021 high, to act as a resistance area.
  • So far, they got a 2-legged pullback from a wedge pattern (Mar 18, Apr 21, and Jul 1) and an embedded wedge (May 26, Jun 12, and Jul 1).
  • They want a TBTL (Ten Bars, Two Legs) pullback lasting a few weeks. The pullback phase is currently underway.
  • If the market trades higher, they want it to form a lower high (vs Jul 24), followed by another leg down to form the wedge pattern (with the first two legs being Jul 17 and  Aug 1).
  • The bulls got a strong move up in the form of a tight bull channel.
  • They want another leg up to form the wedge pattern, with the first two legs being April 21 and July 1 highs.
  • They want a measured move (based on the height of the trading range), which will take the market to the 2021 high area.
  • They see the current move as a pullback following the recent overbought condition.
  • They want the 20-week EMA to act as support, forming a double bottom bull flag (Jul 17 and Aug 1) and a 20-gap bar buy setup.
  • They want a retest of the recent leg extreme high (Jul 1), followed by a strong breakout.
  • So far, the move up (Jul 1) was in a tight bull channel which means strong bulls.
  • For now, the odds slightly favor the pullback to be minor.
  • Traders will see if the bears can create more follow-through selling.
  • Or will the pullback be weak (sideways with overlapping ranges, bull bars, prominent tails below candlesticks) and holding above the 20-week EMA instead? If this is the case, the odds of a retest of the July 1 high and breakout above will increase.

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