EURUSD sideways pullback after parabolic wedge

Market Overview: Weekend Market Analysis

The EURUSD Forex has been trading sideways for the last 2 to 3 weeks. The bears want a reversal lower from a double top bear flag or a wedge bear flag. If the EURUSD sideways pullback continues, odds are sellers will return to sell the pullback.

The bulls want this to be the start of the reversal higher following the breakout from the potential final bear flag. 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.

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a bear inside bar with a small tail below. An inside bar means the EURUSD is in a breakout mode.
• Last week, we said that the EURUSD may still be in the pullback phase for another 1-3 weeks therefore slightly favoring sideways to up. This remains true.
• The EURUSD is in a pullback from the parabolic wedge sell-off testing the 700-pip measured move lower based on the height of the yearlong trading range (August 2020 to August 2021) around 1.0855.
• Another bear measured move based on the height of the 4-month trading range (Nov 2021 to Feb 2022) will take them to around 1.072 which is very close to the March 2020 low.
• We have said that the leg down from February is strong enough for traders to expect at least a small 2^nd leg sideways to down after a pullback (bounce).
• The bears want a resumption of the bear trend and a test of the March 2020 low followed by a strong breakout below. They see a micro double top (March 10 and March 17) bear flag. Can next week resume the trend down?
• An inside bar is a breakout mode situation. There is a 50-50% probability of a bull and bear breakout. Furthermore, the first breakout has a 50% chance of failing. 
• Since this week was a bear inside bar closing near the lower half of the week’s range, it is a moderate sell signal bar for next week. 
• 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 last year’s low. The trading range came late in the bear trend, and that makes it a potential final bear flag.
• The bulls will need to create strong consecutive bull bars closing near their highs to convince traders that a reversal higher may be underway. So far, the pullback consists of a bull bar with a long tail above and an inside bear bar.
• 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 closes below the March 2020 low, the selloff should continue down to the 2017 low, which is the bottom of the 15-year bear trend. A couple closes below that low would probably be the start of a measured move down based on the height of the seven-year trading range.
• We have said that the leg down from February is strong enough for traders to expect at least a small 2^nd leg sideways to down after a pullback (bounce). This remains true.
• For now, the EURUSD may still be in the pullback phase for another 1-3 weeks. If the bears get another follow-through bar closing near the low, the odds of a test of March 2022 low and March 2020 low increases.

The Daily EURUSD chart

• The EURUSD traded sideways to down for the week. The candlesticks from Tuesday to Thursday had small bodies and prominent tails below, and Friday’s candlestick was a bear bar closing near the low with a long tail above. 
• The EURUSD is currently in a 2-legged pullback following the trend channel line overshoot (March 4) and a parabolic wedge (February 14, February 24 and March 4). 
• The bears want the EURUSD to turn lower from a double top bear flag (March 10 and March 17). 
• 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, but 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.
• The sell-off from February was strong enough for traders to expect at least a small 2^nd leg sideways to down after the pullback.
• If the pullback lasts for another 1 to 2 weeks, and the bulls get another push-up but are not able to create strong consecutive bull bars closing near their highs trading back into the 4-month tight trading range, it would be the 3^rd push-up and would then form a wedge bear flag. The bears would then want the second leg sideways to down to form with the next measured move 1.072 and March 2020 low as the next targets.
• The bulls hope that the 4-month tight trading range (Nov 2021 to Feb 2022) late in the trend is the final flag of the 15-month sell-off. They want this to be the start of the reversal higher testing the February 10 high.
• 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.
• The pullback (bounce) in the last 2 to 3 weeks was a 50% pullback of the February sell-off. 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.
• 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. This remains true.
• For now, since Friday was a bear bar closing near the low, it is a sell signal bar for Monday. If the bears get consecutive bear bars closing near their lows, odds of the second leg sideways to down beginning increases.

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