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EURUSD Breakout Below the Trading Range Low

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Market Overview: EURUSD Forex

The EURUSD breakout below the trading range low in November but closed with a long tail and above the October 3 high. The bears want a strong breakout below the trading range (October low) followed by a measured move using the height of the trading range. The bulls want a failed breakout below the trading range and a reversal from a large double bottom bull flag (Oct 3 and Nov 22).

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly - Test Bottom of Trading Range, EURUSD Breakout Below the Trading Range Low
  • The November monthly EURUSD candlestick was a big bear bar with a long tail below, closing in its lower half.
  • Last month, we said traders would see if the bears could create a follow-through bear bar closing below the 20-month EMA or if the market would trade slightly lower but stall and close with a long tail or a bull body instead.
  • The market traded sharply lower breaking far below the trading range low but closed above the October 3 low.
  • The bears got a reversal from a double top bear flag (Dec 28 and Sept 25) and a larger double top bear flag (July 18 and Sept 25).
  • They want a strong breakout below the trading range (October low) followed by a measured move using the height of the trading range.
  • At a minimum, they hope to get another leg down to complete the micro wedge pattern with the first two legs being the October 23 and November 22 lows.
  • They need to create a strong breakout below the trading range low with sustained follow-through selling trading to increase the odds of a measured move down.
  • The bulls see the current move as a sell vacuum and a bear leg within a trading range.
  • They want a failed breakout below the trading range and a reversal from a large double bottom bull flag (Oct 3 and Nov 22).
  • They hope the bottom of the trading range will act as support.
  • So far, the market remains in a 24-month trading range.
  • The market trades around the lower third of the trading range which can be the buy zone of trading range traders.
  • Most breakouts from trading ranges fail and odds favor the trading range to continue.
  • For now, traders will see if the bears can create another leg down to complete the micro wedge pattern (the first two legs being Oct 23 and Nov 22).
  • Or will we see more profit-taking activity around the lower third of the large trading range instead?
  • Poor follow-through and reversals are hallmarks of a trading range.
  • Traders will BLSH (Buy Low, Sell High) until a breakout with sustained follow-through buying/selling from either direction.

The Weekly EURUSD chart

EURUSD Weekly - Parabolic Wedge, Bottom of TR, Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was an inside bull bar closing near its high with a prominent tail below.
  • Last week, we said that odds slightly favor the market to still be in the sideways to down phase even if there is a pullback. Traders would see if the bears could create follow-through selling below the trading range low or if we would see some profit-taking around the current levels.
  • This week was a pullback following the breakout below the trading range low. The bears did not get a follow-through bear bar.
  • Previously, the bears got a strong bear leg breaking below the trading range low.
  • They see this week as a breakout pullback. They want a resumption of the move followed by a measured move down based on the height of the trading range.
  • Because of the strong leg down (from Sept), the bears expect to get (at least) a small sideways to down leg to retest the current extreme low (now Nov 22) after a pullback.
  • They want another leg down to complete the wedge pattern (the first two legs being Oct 23 and Nov 22).
  • The bulls see the current move as a sell vacuum and a bear leg within a trading range.
  • They want a failed breakout and the trading range low to act as support followed by a retest of the middle of the trading range (around the 20-week EMA).
  • They want a reversal from a large double bottom bull flag (Oct 3 and Nov 22).
  • The bulls hope to get a strong entry bar next week by getting a breakout above the inside bar followed by a retest of the middle of the trading range.
  • If the market trades lower, they see it as a retest of the prior leg’s extreme low and want a small double bottom with the November 22 low.
  • They must create consecutive bull bars closing near their highs to indicate that they are back in control.
  • Since this week’s candlestick is an inside bull bar closing near its high, the market is in breakout mode.
  • Because it is a bull bar closing near its high, the first breakout may be above the inside bar. The first breakout can fail 50% of the time.
  • For now, the market may still be in the sideways to up pullback phase.
  • The prior bear leg was strong and in a tight bear channel.
  • Odds slightly favor at least a small sideways to down leg after the current pullback.
  • Traders will see if the bulls can create a strong bull entry bar (a follow-through bull bar).
  • Or if the market will trade slightly higher but close with a bear body or a long tail above.
  • Most breakouts from the trading ranges fail and odds favor the trading range to continue.
  • If the bears can create a strong breakout with sustained follow-through selling, the odds of a successful breakout and a measured move will increase.
  • The market is trading around the lower third of the trading range which can be the buy zone of trading range traders.
  • The EURUSD is in a 107-week trading range. (Trading range high: July 2023, low: October 2023). 
  • Traders will BLSH (Buy Low, Sell High) within a trading range until a breakout with follow-through selling/buying.

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