EURUSD Wedge and Micro Wedge

Market Overview: EURUSD Forex

The EURUSD Forex formed a wedge and micro wedge on the weekly chart. However, the bears are still weak and need to do more to convince traders of a pullback or a reversal. The bulls want any pullback to be sideways and not deep. If the pullback is weak and sideways, the odds of another strong leg-up increase.

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a doji bar. 
• Last week, we said that while odds slightly favor the EURUSD to trade sideways to up, the rally since October has lasted a long time and is climactic. However, the bears are still weak and need to do more to convince traders of a pullback or a reversal.
• This week traded above last week’s high but closed below it. It was almost a perfect doji.
• The bulls got a strong spike and channel up and hope that the market is now Always In Long. 
• They want an endless small pullback bull trend up.
• Since the September low, the bulls have created bigger bull bodies with closes near their highs with follow-through buying, while the bear bars are weak with no follow-through selling. That means strong bulls.
• The strong move up increases the odds of at least a small second leg sideways to up after a deeper pullback. 
• The bulls want any pullback to be sideways and not deep. If the pullback is weak and sideways, the odds of another strong leg-up increase.
• The bears want a 2-legged sideways-to-down pullback lasting at least a few weeks. 
• However, they have not yet been able to create credible selling pressure with strong bear bars and follow-through selling.
• They hope to get a reversal lower from a double-top bear flag (with May/Jun 2022 high) and a wedge top (Nov 15, Dec 5 and Jan 26).
• The last 3 weeks also formed a micro wedge (Jan 13, Jan 18 and Jan 26). The last 2 candlesticks are becoming smaller, which means a loss of momentum from the bulls.
• Because of the strong move-up, the bears will need a strong reversal bar or at least a micro double top before traders would be willing to sell aggressively.
• Since this week was almost a perfect doji, it is a neutral signal bar for next week. 
• While odds slightly favor the EURUSD to trade sideways to up, the rally since October has lasted a long time and is climactic.
• The wedge and micro wedge patterns and loss of momentum increase the odds that we will see at least a small pullback which can begin at any moment.
• For now, the bears are still weak and need to do more to convince traders of a pullback or a reversal.
• The levels around 1.080 are resistances (20-month exponential moving average – not shown on chart).
• Traders will see if the bulls can break far above it or if the EURUSD stalls and reverses lower, starting the pullback phase.

The Daily EURUSD chart

• The EURUSD gapped up slightly on Monday but was mostly sideways above the 1.080 level this week.
• Last week, we said that the tight channel up and weak selling pressure continue to slightly favor the EURUSD to trade at least a little higher.
• While this week traded above last week’s high, the bulls were not able to get sustained follow-through buying again.
• The bears see the move up since September as a 50% pullback of the selloff which started in May 2021.
• They want a reversal lower from a double-top bear flag (May/June 2022 high) and a wedge top (Nov 15, Dec 15, and Jan 26). 
• The bears see the move up from January 6 as a rally from a final flag (mid-Dec to the first week Jan) and wants the EURUSD to stall and reverse lower soon.
• Because of the strong move-up, the bears will need a strong reversal bar or at least a micro double top before they would be willing to sell aggressively. 
• The EURUSD formed a micro wedge (Jan 13, Jan 18 and Jan 26) and a micro double top (Jan 23 and Jan 26).
• Thursday and Friday were consecutive weak bear bars due to the prominent tails below.
• The bears need to create strong consecutive bear bars closing near their lows to increase the odds of lower prices.
• The spike & tight channel up since October means strong bulls.
• The odds slightly favor the market has flipped into Always In Long. 
• The bulls want an endless small pullback trend higher. They want any pullback to be sideways and not deep. 
• If there is a deep pullback, the bulls want a reversal from a higher low major trend reversal and a larger second leg sideways to up.
• For now, the tight channel up and weak selling pressure continue to slightly favor the EURUSD to be in the sideways to up phase.
• However, the rally is climactic and lasted a long time. The wedge pattern, micro wedge and micro double top increase the odds of at least a small pullback which can begin at any moment. 
• If the pullback is weak and shallow, the odds of another strong leg-up increase.
• The bears need to do more to convince traders that a pullback is imminent. 
• The levels around 1.080 (20-month exponential moving average – not shown on chart) remain as resistance for now.

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