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EURUSD Forex reversing lower from wedge bear flag

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Market Overview: EURUSD Forex

EURUSD Forex reversing lower from a wedge bear flag on the Daily Chart. The sell-off is in a 7-bar bear micro channel which means persistent selling. Odds favor at least a small second leg sideways to down after a pullback (bounce). 

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Forex Weekly Chart Breakout from Wedge Bear Flag. EURUSD Forex Reversing Lower.
  • This week’s candlestick on the weekly EURUSD Forex chart was a big bear bar with a small tail below. Last week was an outside bull bar – this week broke below it.
  • In the March 27 report, we have said that the leg down from February was strong enough for traders to expect at least a small 2nd leg sideways to down after a pullback (bounce). This week was the start of the second leg sideways to down.
  • The bears want a resumption of the bear trend and a test of the March 2020 low followed by a strong breakout below. If they get that, the next target for the bears is the bottom of the 7-year trading range – the January 2017 low.
  • The bears will need next week to be a bear follow-through bar to increase the odds of a deeper sell-off.
  • The bulls hope that the 4-month trading range (Nov 2021 to Feb 2022) is the final flag of the bear leg and want the breakout below to reverse higher from around the 2020 low. The trading range came late in the bear trend, and that makes it a potential final bear flag.
  • The bulls want a reversal higher from a double bottom with March 7 Low and a higher low major trend reversal. However, since this week was a big bear bar, it is a weak buy signal bar for a strong reversal up.
  • The bulls will need at least a micro double bottom or a strong reversal bar before they would be willing to buy aggressively.
  • Al has said that the market has been in a trading range for seven years. It is now near the bottom of the range. Reversals are more likely than breakouts. Therefore, as strong as the selloff has been, it is still more likely a bear leg in the seven-year trading range than a resumption of the 15-year bear trend.
  • If the bears can get a couple of closes below the March 2020 low, the selloff should continue down to 2017 low, which is the bottom of the 15-year bear trend. A couple of closes below that low would probably be the start of a measured move down based on the height of the seven-year trading range.
  • The odds of a reversal from the bottom of the trading range around the March 2020 low or around the January 2017 low is slightly higher than a strong breakout below 2017 low and a measured move down.
  • For now, odds slightly favor sideways to down for next week. Traders will be monitoring whether the bears get a follow-through bear bar or fail to do so.

The Daily EURUSD chart

EURUSD Daily Chart Breakout from Wedge Bear Flag
  • The EURUSD traded lower in a 7-bar bear micro channel, reversing lower from a wedge bear flag.
  • In the March 27 report, we have said that if the pullback continues to be sideways, odds are sellers will return and sell the double top bear flag or wedge bear flag. The sell-off from February was strong enough for traders to expect at least a small 2nd leg sideways to down after the pullback.
  • Sellers returned to sell the wedge bear flag on the 31st of March. There are 7 consecutive bear bars on the chart which mean persistent selling.
  • The move down in the last 7 days was strong enough for traders to expect at least a small second leg sideways to down after a pullback.
  • The bears have reached the 700-pip measured move lower based on the height of the yearlong trading range (August 2020 to August 2021) around 1.0855 during the spike down to March 4 low. 
  • They have not yet reached the 400-pip measured move based on the height of the 4-month trading range (Nov 2021 to Feb 2022) which will take them to around 1.072 which is very near to the March 2020 low.
  • Bulls hope that this week was simply a sell vacuum to test the March 4 low. They want a reversal higher from a major trend reversal and a double bottom with March 4 low.
  • However, the sell-off is in a tight bear channel. Odds are there will be sellers above at the first pullback (bounce).
  • The bulls will need to do more by creating consecutive bull bars closing near their highs to convince traders that a reversal higher may be underway.
  • As strong as the sell-off has been since January 2021, it is still more likely a bear leg in the 7-year trading range than a resumption of the 15-year bear trend.
  • Traders will be monitoring whether the bears can get a strong breakout below March low or the bulls can create strong consecutive bull bars for a double bottom and a major trend reversal higher.
  • For now, odds favor at least a small second leg sideways to down after a pullback (bounce).

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