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EURUSD Failed Breakout or Pullback?

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Market Overview: EURUSD Forex

Is the weekly chart forming a EURUSD failed breakout or a pullback? The bulls hope the last two weeks were simply a pullback and want at least a small retest of the prior leg extreme (Jul 18). The bears want a reversal down from a wedge top, a trend channel line overshoot and a failed breakout above the April high. 

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: EURUSD Failed Breakout or Pullback? Broad Bull Channel
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with a long tail below, closing below the middle of its range.
  • Last week, we said that due to the lack of follow-through buying, odds slightly favor the market to trade at least a little lower.
  • The bulls recently got the third leg up forming a wedge pattern (Feb 2, Apr 26, and Jul 18).
  • They want a strong leg-up lasting many weeks like the one which started in November 2022 but did not get follow-through buying above the April high.
  • The targets for the bulls are the Jan/Feb 2022 highs and a measured move up using the height of the prior 6 month’s trading range which will take them to around the October 2021 high.
  • They hope that the last two weeks were simply a pullback and want at least a small leg to retest the July 18 high. They see the market as still in a broad bull channel.
  • If the market trades lower, the bulls want the 20-week exponential moving average to act as support and form a higher low.
  • They then want another leg up completing the smaller wedge pattern (in the current leg) with the first two legs being June 22 and July 18.
  • The bears hope to get a reversal from a failed breakout above the April high, a wedge top (Feb 2, Apr 26, and Jul 18) and a trend channel line overshoot.
  • They manage to create follow-through selling this week, trading back into the broad bull channel.
  • However, the long tail below this week’s candlestick indicates that the bears are not yet strong.
  • The bears need to continue creating consecutive bear bars, breaking far below the 20-week exponential moving average to increase the odds of a reversal down.
  • Since this week was a bear bar closing below the middle of the range, it is a sell signal bar for next week, albeit weaker.
  • While the EURUSD may still trade sideways to down in the coming week(s), odds slightly favor the market to still be in the broad bull channel phase and favor at least a small retest of the July 18 high after the pullback.
  • Traders will see if the bears can continue to create follow-through selling or will the market stall above (or around) the 20-week exponential moving average.
  • If instead, the bears get big consecutive bear bars closing near their lows, it will increase the odds of a reversal down from a wedge top.

The Daily EURUSD chart

EURUSD Daily: Wedge Top or Pullback? Broad Bull Channel
  • The EURUSD traded sideways to down for the week. Thursday was an outside bear bar but there was no follow-through selling on Friday.
  • Last week, we said that the EURUSD may still trade sideways to down for a while more, probably testing the 20-day exponential moving average to work off the recent overbought conditions.
  • The bulls got a strong breakout from a wedge bull flag (Jun 23, Jun 30, and Jul 6) and a larger second leg sideways to up completing the large wedge pattern (Feb 2, Apr 26, and Jul 18). 
  • They want the breakout above April to be the start of a new leg lasting many weeks. However, they were not able to get sustained follow-through buying above the April high.
  • They hope that the recent move down is simply a pullback and wants another leg up completing the smaller wedge pattern (since May low) with the first two legs being June 22 and July 18.
  • The prior move up is strong enough for traders to expect at least a small retest of the prior leg extreme (July 18).
  • The bears hope to get a failed breakout above the April high. 
  • They want a reversal down from a trend channel line overshoot and a wedge top (Feb 2, Apr 26, and Jul 18).
  • While this week traded lower, the candlesticks had a lot of overlapping price action with doji and bull bars. 
  • The lack of follow-through selling following Thursday’s big outside bear bar also indicates that the bears are not yet very strong.
  • They will need to continue creating consecutive bear bars closing near their lows to increase the odds of a failed breakout.
  • Friday was a bull bar with a prominent tail above. It is a weaker buy signal bar for Monday and not a strong buy setup since it is following a tight channel down.
  • For now, the EURUSD may still be in the sideways to down pullback phase.
  • Traders will see if the bears can continue to create strong bear bars or will the pullback phase be weak (with overlapping bars, doji(s) and bull bars). 
  • Odds slightly favor the EURUSD to form at least a small retest of the prior leg extreme (Jul 18) after the pullback.

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