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EURUSD Tight Bear Channel

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Market Overview: EURUSD Forex

The market formed a EURUSD tight bear channel which means strong bears. The market may still trade at least a little lower. If the bears continue to create strong consecutive bear bars trading far below the May and March low, it will increase the odds of the reversal being successful. Because the selloff is climactic, a minor pullback may begin within a few weeks.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: 8-Consecutive Bear Bars, Strong Bears, EURUSD Tight Bear Channel
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing near its low.
  • Last week, we said that the odds slightly favor the market to still be in the sideways to down phase.
  • The bears got a reversal from a wedge top (Feb 2, Apr 26, and Jul 18), a trend channel line overshoot and a higher high major trend reversal.
  • The move down is in a tight bear channel consisting of 8 consecutive bear bars. 
  • That increases the odds of at least a small second leg sideways to down after a pullback.
  • If there is a pullback (bounce), the bears want it to be weak (overlapping bars, doji(s), bear bars) and sideways, followed by another leg down from a lower high major trend reversal.
  • The bulls hope that the current leg down is simply a pullback (like March and June) and want at least a small leg to retest the July 18 high. 
  • They see the market as still being in a broad bull channel.
  • They want the bull trend line to act as support and the market to form a higher low.
  • If the market trades lower, they want a reversal up from a wedge bull flag (Mar 15, May 31 and currently Sept 7) around May or March low.
  • The problem with the bull’s case is that the move down is very strong. They will need a strong bull reversal bar or at least a micro double bottom before they would think to buy more aggressively.
  • Since this week was a bear bar closing near its low, it is a sell signal bar for next week. 
  • While it is sitting at a potential support area (bull trend line), the bulls still need to do more to prove that they are at least temporarily back in control. They have not yet been able to do so.
  • For now, odds slightly favor the market to trade at least a little lower.
  • Traders will see if the bears can create a breakout below the May & March low, or will next week trade lower but reverse to close with a long tail below or a bull body?
  • If the bears continue to create strong consecutive bear bars, it will increase the odds of the reversal being successful.
  • Because the selloff is climactic, a minor pullback may begin within a few weeks.
  • Any pullback would likely be minor and favor at least a small second leg sideways to down.

The Daily EURUSD chart

EURUSD Daily: 3rd Leg Down, Slightly Climactic
  • The EURUSD continued the move down from last week. Wednesday to Friday’s candlesticks have overlapping ranges.
  • Previously, we said odds slightly favor at least a small second leg sideways to down (after a pullback) to test the leg extreme low (previously Aug 25).
  • The market continued lower after a brief pullback and is now testing near the May low area.
  • The bears got a reversal from a trend channel line overshoot, a wedge top (Feb 2, Apr 26, and Jul 18) and a higher high major trend reversal.
  • They want a strong breakout below the bull trend line.
  • The move down since July 18 is in a tight bear channel. That increases the odds of at least a small second leg sideways to down after a larger pullback.
  • If there is a larger pullback (bounce), the bears want a reversal down from a lower high major trend reversal.
  • The bulls hope that the recent move down is simply a deep pullback.
  • They want at least a minor pullback from a parabolic wedge (Aug 8, Aug 25, and Sept 7) and a small retest of the prior leg extreme high (July 18). 
  • They want the market to stall around the bull trend line area and reverse up.
  • As strong as the selloff has been, the bulls hope that it is simply a sell vacuum and a bear leg within a trading range.
  • Because of the strong move down, the bulls would need to create consecutive bull bars closing near their highs (bull spike) breaking far above the minor bear trend line (drawn from Jul 18 high) to increase the odds of higher prices.
  • For now, odds slightly favor the market to trade at least a little lower.
  • Traders will see if the bears can create a breakout below the bull trend line and the May & March low, or will the market find buyers there.
  • If the bears get a strong breakout below with follow-through selling, it will increase the odds of a deeper pullback or a reversal.
  • While the EURUSD selloff is strong, the move has also lasted a long time and is slightly climactic. A minor pullback can begin within a few weeks.
  • If a pullback (bounce) begins, traders will see the strength of the pullback. If it is weak (overlapping bars, doji(s), bear bars) and sideways, the odds of another leg down increase.

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