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EURUSD Testing the 20-Month EMA

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Market Overview: EURUSD Forex

The market is in a pullback phase, with EURUSD testing the 20-month EMA. Bulls want the 20-month EMA and the August 1 low to act as support, followed by a retest of the prior trend extreme high (January 27). Bears need consecutive strong bear bars breaking below the 20-month EMA and the August low to shift the market into Always In Short.

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly - Test 20-Month EMA, Bears Need FT Selling, EURUSD Testing the 20-Month EMA
  • March formed a bear bar closing below the midpoint of its range, with a long tail below.
  • Last month, we said traders would watch for a breakout from the ioi (inside-outside-inside) pattern and whether follow-through develops.
  • The market broke below the ioi pattern and tested near the 20-month EMA, but reversed up from its low on the final trading day of the month.
  • Bulls see the current move as a pullback forming a large double bottom bull flag (August 1 and March 30).
  • They want the 20-month EMA and the August 1 low to act as support, followed by a retest of the prior trend extreme high (January 27) and a resumption of the bull trend.
  • They need consecutive strong bull bars to demonstrate control.
  • Bears see the move from the January 2025 low to the January 2026 high as a spike and channel.
  • They want a reversal from a wedge top (July 1, September 17, January 27) and a trend channel line overshoot (January 27).
  • Bears want a deep pullback to retest the start of the channel (May 12), transitioning into a trading range.
  • If the market trades higher, bears want it to stall below the January 27 high, forming a lower high major trend reversal.
  • Bears need consecutive strong bear bars breaking below the 20-month EMA and the August low to shift the market into Always In Short.
  • The market remains in a 10-month trading range.
  • Until there is a decisive breakout, traders may continue Buy Low, Sell High (BLSH), buying near the lower third and selling near the upper third of the range.
  • The middle of the range, around the 1.165 area, can act as a magnet and area of balance.

The Weekly EURUSD chart

EURUSD Weekly - Bears Need FT Selling, Bulls Want HL
  • This week’s candlestick was a bull doji closing in its lower half, with prominent tails.
  • Last week, we said traders would watch whether bears could retest the March 13 low and follow through with a strong breakout, or if the market would continue to stall near the trading range low, followed by a retest above the 20-week EMA in the weeks ahead.
  • The doji with long tails indicates that both bulls and bears were active during the week.
  • Bulls see the March 13 move as a sell vacuum test of the trading range low.
  • They want the August low and trading range low area to hold as support.
  • Bulls see a two-bar reversal (March 3 and March 13) and a large double bottom bull flag (August 1 and March 13).
  • They view this week as a retest of the prior low and want a higher low relative to March 13, followed by a second leg sideways to up.
  • Bulls want a High 2 buy setup, but the signal bar is a doji which is not ideal.
  • Buying above a doji with a stop, especially below the 20-week EMA, risks buying near the top of a trading range. A doji is a 1-bar trading range.
  • Bulls need consecutive strong bull bars with sustained follow-through above the 20-week EMA to increase the odds of a retest of the range high.
  • Previously, bears formed a 6-bar bear microchannel testing the bottom of the trading range, indicating persistent selling pressure.
  • They want sellers on the first pullback above the microchannel, but the move so far lacks strong follow-through, forming two dojis and a higher low (March 30).
  • If the market trades higher, bears want the 20-week EMA and bear trendline to act as resistance.
  • Bears want a strong breakout below the 43-week trading range, with a measured move based on its height, projecting toward the May 12 low.
  • Bears need consecutive bear bars closing near their lows and a strong break below the August low to show control.
  • The market is stalling around the lower third of the trading range.
  • Price remains within the 43-week range. Until there is a clear breakout with strong follow-through, traders may continue Buy Low, Sell High (BLSH), buying near the lower third and selling near the upper third.
  • The middle of the range can act as a magnet and an area of balance, currently around the 20-week EMA.
  • Traders will watch whether bears can retest and break below the March 13 low, or if the market continues to stall near the range low.
  • If the market continues to stall here, the odds of a bull leg to retest the trading range high will increase.

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