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EURUSD second leg sideways to down

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Market Overview: EURUSD Forex

The EURUSD Forex stalled around the April low which was the last breakout point. The bears are now getting the second leg sideways to down that they were expecting. The bulls hope the sell-off this week was simply a sell vacuum test of the low. Odds slightly favor a second leg sideways to down next week. Bears want a follow-through bear bar while the bulls want a bull bar even though the EURUSD may trade lower first.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Second Leg Sideways to Down on Weekly Chart
  • This week’s candlestick on the weekly EURUSD Forex chart was a big bear bar closing near the low. 
  • Last week, we said that odds are the EURUSD is still in the 2-legged sideways to up pullback phase. Because of the tight channel down, the bears expect at least a small second leg sideways to down after the pullback is over.
  • The bulls hope that this week was simply a deep pullback and want at least a small second leg sideways to up.
  • Bulls hope that the sell-off since March was a sell vacuum test of the 7-year trading range low. They want at least a 2-legged sideways to up pullback. The 2 consecutive bull bars were likely the first leg up.
  • The targets for the bulls are the last major lower high on April 21 or around the 20-week exponential moving average or the bear trend line. So far, they have failed to reach these targets.
  • The bears want a retest of the 2017 low followed by a strong breakout and a measured move down based on the height of the 7-year trading range.
  • We have said that because of the tight channel down, the bears expect at least a small second leg sideways to down after the pullback is over. The second leg sideways to down seems to be underway currently.
  • Because this week was a big bear bar closing near the low, it is a weak bull signal bar for a strong reversal up. Odds are next week should trade at least slightly lower.
  • If the bears get a bear follow-through bar next week, the odds of a retest of the 2017 low increase.
  • If the bears get a breakout below 2017 low and a closes below it, odds of a measured move down based on the height of the 7-year trading range increase.
  • Al has said that the market has been in a trading range for seven years. Reversals are more likely than breakouts and a measured move down. This remains true.
  • Therefore, as strong as the sell-off 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.
  • For now, odds are next week should trade at least slightly lower. 
  • Bears want a strong follow-through bear bar while the bulls want a bull bar closing near the high even though the EURUSD may trade slightly lower first.

The Daily EURUSD chart

EURUESD Forex Daily Chart Pullback Stall around April Low with Retest of Low
  • The EURUSD traded sideways to up earlier in the week but reversed into a bear outside bar closing at the low on Thursday. The bears got a strong follow-through bar on Friday closing near the low.
  • We have said that the bulls want at least a 2-legged sideways to up pullback. However, the sell-off since March 31 was in a tight bear channel. It means the bears are strong and odds are, there should be at least a small second leg sideways to down once this pullback is over.
  • The bulls got a small second leg sideways to up this week but continue to stall around April low. The bears returned to sell the lower high.
  • The bulls hope that this is simply a deep pullback and want a reversal higher from a higher low major trend reversal. They want a larger second leg sideways to up following this deep pullback.
  • We have said that the bears want the pullback to stall around the April low, which was the breakout point for the last leg down. They want a reversal lower from a lower high. They got that this week.
  • The bears see the pullback as minor to be followed by a re-test of the 2017 low and want a measured move down based on the height of the 7-year trading range.
  • The sell-off since March 31 was in a tight bear channel and there should be at least a small second leg sideways to down once the pullback is over. It is happening now.
  • Since Friday was a big bear bar, it is a bad buy signal bar for Monday. The bulls will have a better setup following a strong bull reversal bar or a micro double bottom.
  • Odds slightly favor the EURUSD to trade at least slightly lower next week.
  • Traders will be monitoring whether the bears get follow-through selling and a retest of 2017 low, or the EURUSD stalls and reverse higher from a higher low.

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