EURUSD Tight Bear Channel

Market Overview: EURUSD Forex

The EURUSD Forex formed a EURUSD tight bear channel closing below the 20-week exponential moving average (EMA). The bears want follow-through selling next week. If they get that, it increases the odds of a deeper pullback beginning. The bulls want the 20-week EMA to act as support and hope the market will reverse back above the 20-week EMA. 

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with a small tail below.
• Last week, we said that the odds slightly favor a small second leg sideways to down after a pullback.
• This week closed below the 20-week EMA (exponential moving average).
• The bears got a reversal down from a higher high major trend reversal and failed breakout above the February 2 high.
• They got the third consecutive bear bar, and they now have a 4-bar bear micro channel. They want a retest of the March 15 low.
• The bears will need to create follow-through selling breaking far below the 20-week EMA to convince traders that a reversal down could be underway.
• If there is a pullback, the bears want at least a small second leg sideways to down testing the current leg low (May 26).
• The bulls got breakouts above the February 2 high in April and May; 3 times (a wedge – Apr 14, Apr 26, and May 3) but did not get sustained follow-through buying.
• When the market does something a few times and fails, it will often then do the opposite. The EURUSD stalled and has started the pullback phase.
• The bulls hope to get at least a retest of the April high after the current pullback.
• They want the 20-week EMA to act as support. They hope the EURUSD will reverse back above the 20-week EMA next week.
• If the EURUSD trades much lower, they want a reversal up from a double bottom bull flag with the March low. 
• The current selloff is in a tight bear channel. The bulls will need a strong reversal bar or a micro double bottom before they would be willing to buy aggressively.
• Since this week was a bear bar closing near the low, it is a sell signal bar for next week. 
• Traders want to see if the bears can get a follow-through bear bar following this week’s close below the 20-week EMA.
• Or will the EURUSD form a minor pullback (bounce) and reverse back above the 20-week EMA?
• For now, odds slightly favor a small second leg sideways to down after a small pullback.

The Daily EURUSD chart

• The EURUSD pulled back slightly earlier in the week and then formed another leg lower for the rest of the week. Friday was an outside bull doji.
• Last week, we said that odds slightly favor at least a small second leg sideways to down after a slightly larger pullback.
• This week continued the tight bear channel down in a parabolic wedge (May 15, May 19, and May 26).
• The bears got a reversal down from a higher high major trend reversal (with Feb high), a wedge (Mar 23, April 4, and April 14) and a micro wedge (April 14, April 26, and May 3).
• The move down is in a tight bear channel. That means persistent bears.
• Traders expect at least a small second leg sideways to down after a larger pullback. 
• They expect at least TBTL (Ten Bars, Two Legs) in the pullback phase. The pullback currently consists of 15 bars (candlesticks).
• The bulls hope the pullback will form a higher low. 
• 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 small leg retesting the prior leg extreme high (April 26) after the pullback.
• They want a reversal up from a parabolic wedge (May 15, May 19, and May 26).
• If the EURUSD trades much lower, they want a reversal up from a larger double bottom bull flag with the March low.
• While the tight channel down means strong bears, the selloff is also slightly climactic.
• There may be a minor pullback followed by a second leg sideways to down retesting the current leg low (May 26).

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