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EURUSD Wedge Top but Tight Bull Channel

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Market Overview: EURUSD Forex

EURUSD wedge top formed but the rally is in a tight bull channel. The bear bars are weak and had no follow-through selling. Bears need to do more to convince traders that a pullback/reversal is imminent. Odds slightly favor EURUSD to trade at least a little higher.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Wedge Top but Tight Bull Channel
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull bar closing near its high.
  • Last week, we said that odds slightly favor sideways to down movements in the next few weeks to relieve the overbought conditions.
  • This week traded higher and closed above the December high.
  • The bulls got a failed breakout below the 7-year trading range in a tight bull channel. That means strong bulls.
  • The bulls hope that the market is now Always In Long. 
  • They want an endless small pullback bull trend up.
  • The current strong move up increases the odds of at least a small second leg sideways to up after a 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.
  • 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.
  • The bears want a two-legged sideways-to-down pullback lasting at least a few weeks. However, they were not able to create follow-through selling following last week’s weak pullback bar.
  • They hope to get a reversal lower from a double top bear flag (with May/Jun high) and a wedge top (Nov 15, Dec 5 and Jan 13).
  • However, they have not been able to create follow-through selling and strong bear bars. 
  • They 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 a bull bar closing near its high, it is a good buy signal bar for next week.
  • Odds slightly favor the EURUSD to trade at least a little higher.
  • The wedge pattern increases the odds that we will see at least a small pullback. 
  • However, 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 above (20-month exponential moving average – not shown on chart).
  • Traders will see if the bulls can break far above it or if the EURUSD trades higher but stalls and reverses lower, starting the pullback phase.

The Daily EURUSD chart

EURUSD Daily: Wedge Top but Tight Bull Channel Up
  • The EURUSD traded higher for the week with a small pullback on Friday.
  • Last week, we said that odds favor that the EURUSD trade at least a little higher and traders will see if the bears can get a small second leg sideways to down, or a retest January 2 high and breakout above.
  • The bears failed to get another leg lower and the EURUSD broke above January 2 high.
  • They see the move up since October as a 50% pullback of the selloff which started in May 2021.
  • Bears want a reversal lower from a double top bear flag (May/June high) and a wedge top (Nov 15, Dec 15, and Jan 13). 
  • They hope this week was 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 bears need to create strong consecutive bear bars closing near their lows to increase the odds of lower prices.
  • The bulls got a failed breakout below the 7-year trading range. The spike & tight channel up means strong bulls.
  • They hope that the market has flipped into Always In Long. 
  • Bulls want an endless small pullback higher. They want any pullback to be sideways and not deep. 
  • If they continue to get weak and shallow pullbacks, the odds of another strong leg-up increase.
  • 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 trade at least a little higher.
  • The bears need to do more to convince traders that a pullback is imminent. 
  • Traders will see if the bulls can trade far above 1.080 (20-month exponential moving average – not shown on chart) or if the EURUSD trades slightly higher but stalls and reverses lower.

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