EURUSD Weak PB to 20-Week EMA

Market Overview: EURUSD Forex

The EURUSD Forex formed a weak PB (Pullback) to the 20-week exponential moving average. The bulls see the pullback as forming a micro wedge. This week’s bull bar closing near its high is a buy signal bar for next week. The bears hope that the recent rally was simply a deep pullback and 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 bull bar closing near its high with a long tail below.
• Last week, we said if the current pullback remains weak (with overlapping bars, doji(s) and bull bars) as it is now, the odds will favor a retest of the April high in the coming weeks.
• This week traded below last week’s low but reverse to close near its high.
• The bears were expecting at least a small second leg sideways to down following the tight bear channel down to May 31 low. 
• Instead of a weak pullback (bounce), the EURUSD spiked higher.
• They hope that the recent rally was simply a deep pullback and want a reversal down from a lower high major trend reversal and a head and shoulders top.
• The problem with the bear’s case is that they have not been able to create strong bear bars with follow-through selling. They are not as strong as they hoped to be.
• The bulls 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 the last three weeks were simply a pullback forming a micro wedge (Jun 23, Jun 20, and July 6) and want another leg higher.
• Since this week’s candlestick was a bull bar closing near its high, it is a buy signal bar.
• If the current pullback remains weak (with overlapping bars, doji(s) and bull bars) as it is now, the odds will favor a retest of the April high in the coming weeks. This remains true.
• For now, odds slightly favor the EURUSD to trade at least a little higher.
• A lower probability event would be a surprise big bear bar.

The Daily EURUSD chart

• The EURUSD traded sideways to down earlier in the week but reversed higher on Thursday and Friday.
• Previously, we said that the odds slightly favor a larger second leg sideways to up after the pullback.
• The bulls see the last three weeks simply as a wedge bull flag (Jun 23, Jun 30, and Jul 6).
• They want a 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. So far, it has been so.
• They will need to create follow-through buying breaking above the June 22 high to increase the odds of another strong leg up.
• The bears expect at least a small second leg sideways to down following the strong leg down to May 31 low.
• However, instead of a strong retest of May low, the last 3 weeks had a lot of overlapping bars, doji(s), and bull bars which indicates that the bears are not as strong as they hope to be.
• They hope that Friday’s strong move up was simply a retest of the June 22 high and want a reversal down from a smaller double top (with June 22 high), a lower high major trend reversal and a head and shoulders top.
• Since Friday was a bull bar closing near its high, it is a buy signal bar for Monday.
• The odds slightly favor the EURUSD to trade at least a little higher.
• Traders will see if the buyers can create strong follow-through buying or will the market trade slightly higher but stall around June 22 high area.

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