EURUSD Pullback or LH MTR?

Market Overview: EURUSD Forex

The EURUSD pullback on the weekly chart following last week’s close above the 20-week exponential moving average. The bulls did not get a follow-through buying. They hope that this week is simply a pullback and want another leg higher after the pullback. The bears want a reversal down from a lower high major trend reversal and a head and shoulders top.

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with prominent tails above and below.
• Last week, we said that the odds slightly favor the bull channel resuming in the coming weeks, forming a retest of the April high.
• This week traded higher but reversed to close as a bear bar. The bulls did not get follow-through buying.
• They want another strong leg up, completing the wedge pattern with the first two legs being February 2 and April 26.
• At the very least, they want a retest of the April high after the recent pullback.
• The bulls hope that this week is simply a pullback and want another leg higher after the pullback.
• The bears got a tight bear channel down to May 31 low. 
• They were expecting at least a small second leg sideways to down after the current pullback.
• However, instead of a weak pullback (bounce), the EURUSD spiked higher.
• The bears hope that the rally last week was simply a deep pullback and want a retest of the May 31 low.
• They want a reversal down from a lower high major trend reversal and a head and shoulders top.
• Since this week’s candlestick was a bear bar with a prominent tail below, it is a weaker sell signal bar.
• Traders will see if the bears can create a follow-through bear bar or will the EURUSD form a weak pullback with overlapping bars, doji(s) and bull bars.
• If the pullback is weak, the odds will favor a retest of the April high in the coming weeks.

The Daily EURUSD chart

• The EURUSD pulled back slightly earlier in the week but reversed higher on Wednesday. Thursday traded higher but reversed into a bear bar with follow-through selling on Friday.
• Last week, we said that if there is a pullback, odds slightly favor the pullback to be minor and for at least a second leg sideways to up after the pullback.
• The bulls see this week simply as a pullback and want it to be weak (with overlapping bars, doji(s), and bull bars).
• They want another larger second leg sideways to up completing the wedge pattern with the first two legs being February 2 and April 26. 
• At the very least, they want a retest of the prior leg extreme high (April 26).
• They want the 20-day exponential moving average to act as support.
• The bears got a tight bear channel down from the May high.
• They expect at least a small second leg sideways to down after the current pullback (bounce).
• At the very least, the bears want a retest of the recent leg low (May 31).
• However, instead of a weak pullback (with overlapping bars, doji(s), and bear bars), the bulls got a strong spike up with follow-through buying trading far above the 20-day exponential moving average.
• The bears will need to create follow-through selling to increase the odds of a retest of the May 31 low. 
• Since Friday was a bear bar with a prominent tail below, it is a weaker sell signal bar.
• The bears need to break far below the 20-day exponential moving average to convince traders that they are still in control.
• For now, odds slightly favor a larger second leg sideways to up after the pullback.
• However, if the bears get follow-through selling (consecutive bear bars closing near their lows), the odds will swing in favor of a retest of the May 31 low.

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