EURUSD Bulls Need a Breakout

Market Overview: EURUSD Forex

The EURUSD bulls need a breakout above the January 27 high with follow-through buying trading far above the bear trend line and the 20-week EMA to increase the odds of the bull leg beginning. The bears ope the 20-week EMA and the bear trend line will act as resistance.

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a big bull bar closing near its high with a small tail above.
• Last week, we said that traders would see if the bulls could create more follow-through buying, breaking above the bear trend line and the 20-week EMA or if the bears could create a retest and breakout below the January 13 low instead.
• The bulls got a strong follow-through bull bar this week.
• They see the whole move down (from Sept) as a sell vacuum and a bear leg within a trading range.
• They see the recent move (Feb 3) as a retest of the prior trend’s extreme low and want a higher low major trend reversal.
• They want a failed breakout (below the trading range) followed by a retest of the middle of the trading range (near the Nov 6 high area).
• They must create a breakout above the January 27 high with follow-through buying trading far above the bear trend line and the 20-week EMA to increase the odds of the bull leg beginning.
• The bears see the current move as a pullback.
• They want a reversal from a double top bear flag (Jan 27 and Feb 14), or a wedge bear flag (Dec 6, Jan 27 and Feb 14) followed by a retest of the January 13 low.
• They hope the 20-week EMA and the bear trend line will act as resistance.
• They want a strong breakout (below the trading range), and a measured move based on the height of the trading range.
• The problem with the bear’s case is that the breakout and follow-through selling below the trading range has been limited.
• They need to create strong consecutive bear bars closing near their lows to increase the odds of a successful breakout.
• So far, the market has traded sideways in the last 9-weeks.
• Since this week’s candlestick is a big bull bar closing near its high, it can be a buy signal bar for next week.
• The market may still trade at least a little higher.
• For now, traders will see if the bulls can create more follow-through buying trading far above the bear trend line and the 20-week EMA.
• Or will the market trade slightly higher but stall around the 20-week EMA or the December 6 high areas?
• Most breakouts from trading ranges fail and odds favor the trading range to continue.
• If the retest of the January 13 low is weak (overlapping candlesticks, doji(s), bull bars with long tails below), the odds of a higher low major trend reversal followed by another sideways to up leg will increase. So far, this appears to be the case.

The Daily EURUSD chart

• The EURUSD opened slightly lower on Monday and traded sideways to up for the rest of the week.
• Last week, we said that traders would see if the bulls could create more follow-through buying, breaking far above the bear trend line and the 20-day EMA or if the market would retest the January 13 low followed by a breakout attempt instead.
• The bulls created follow-through buying testing near the January 27 high area.
• They see the whole move since September as a sell vacuum and a bear leg testing the trading range low.
• They want a failed breakout and a reversal from a wedge pattern (Oct 23, Nov 22, and Jan 13), an embedded wedge (Dec 13, Jan 2, and Jan 13) and a higher low major trend reversal.
• They want a breakout above the January 27 high followed by a measured move based on the height of the 9-week trading range.
• They must create follow-through buying trading far above the January 27 and December 6 highs to increase the odds of the bull leg beginning.
• If the market trades lower, they want the 20-day EMA to act as support.
• The bears see the current move as a pullback and want a reversal from a double top bear flag (Jan 27 and Feb 14).
• They hope that the January 27 or December 6 highs area will act as resistance.
• They hope to get a retest of the January 13 low followed by a breakout below.
• The problem with the bear’s case is that the follow-through selling following the breakout below the trading range has been limited.
• They need to create strong consecutive bear bars to show that they are back in control.
• So far, the market has traded sideways in the last 9-weeks.
• The buying pressure since the January 13 low is slightly stronger (consecutive bull bars, bigger bull bars) compared to the weaker selling pressure (bear bars with limited follow-through selling).
• For now, traders will see if the bulls can create a breakout above the January 27 high with sustained follow-through buying.
• Or will the market trade slightly higher but stall around the January 27 or December 6 high area?
• Most breakouts from trading ranges fail and odds favor the trading range to continue.

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