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EURUSD Pullback Is Stalling

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Market Overview: EURUSD Forex

The EURUSD pullback is stalling above the 20-week EMA currently. The bears need consecutive bear bars closing near their lows, breaking decisively below the 20-week EMA and the August 1 low, to increase the odds of a reversal. The bulls want the 20-week EMA to act as support, which it has so far.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - Large DB Bull Flag, Minor Pullback, EURUSD Pullback Is Stalling
  • This week’s EURUSD candlestick was an inside bear doji, closing slightly above the middle of its range with a prominent tail below.
  • Last week, we said traders would watch whether the pullback would stall above the 20-week EMA or if the bears could create follow-through selling with closes below it.
  • So far, the pullback continues to stall above the 20-week EMA.
  • The bears have created a second leg sideways to down that recently tested the 20-week EMA (Oct 9).
  • They want the upper third of the multi-year trading range, near the May 2021 high, to act as resistance, forming a lower high relative to Jan 2021.
  • They are also looking for a reversal from a higher high major trend reversal (Sep 17) and a wedge top (Apr 21, Jul 1, and Sept 17).
  • If the market trades higher, bears want it to stall below the September 17 high, forming a lower high major trend reversal, followed by a larger second leg sideways to down.
  • They need consecutive bear bars closing near their lows, breaking decisively below the 20-week EMA and the August 1 low, to increase the odds of a reversal.
  • The bulls see the current move as a pullback within a broader bull trend.
  • They want the 20-week EMA to act as support, which it has so far.
  • They view the recent moves as forming both a large double bottom bull flag (Aug 1 and Oct 9) and a smaller double bottom bull flag (Sep 25 and Oct 9).
  • The bulls need strong consecutive bull bars breaking above the July 1 high to increase the odds of a resumption of the bull trend.
  • The market has been in a trading range for the past 19 weeks.
  • Traders may BLSH (Buy Low, Sell High) within this range — buying in the lower third and selling in the upper third — until there is a strong breakout with sustained follow-through in either direction.
  • Currently, EURUSD is trading around the middle of the range, an area of balance and a magnet.
  • Traders will watch whether the pullback continues to lack follow-through selling and stalling above the 20-week EMA. That would increase the odds of a minor pullback and retest of the Sept 17 high.
  • Or whether bears can create bear bars closing below the 20-week EMA instead?
  • For now, odds slightly favor the pullback being minor.

The Daily EURUSD chart

EURUSD Daily - Large DB Bull Flag, Small Wedge Bull Flag
  • This week, the EURUSD traded slightly lower early in the week, followed by a weak pullback to retest the 20-day EMA on Friday.
  • Last week, we said traders would watch whether the bears could create a third leg sideways to down to retest the October 9 or August 1 lows, or if the bulls would produce a retest of the September 17 high instead.
  • So far, the market is trading sideways around the middle of the trading range.
  • The bears view the recent rally into the September 17 high as a retest of the prior Jul 1 high and a failed breakout.
  • They want a reversal from a higher high major trend reversal and a large wedge top (Apr 21, Jul 1, and Sept 17).
  • They want another sideways-to-down leg from a double top bear flag (Oct 1 and Oct 17) to complete the wedge pattern (the first two legs being Sep 25 and Oct 9).
  • They need strong consecutive bear bars closing near their lows, trading far below the 20-day EMA and the August 1 low, to increase the odds of a successful reversal.
  • If the market trades higher, the bears want it to stall below the September 17 high, forming a lower high major trend reversal.
  • The bulls see the current move as a pullback, forming a large double bottom bull flag (Aug 1 and Oct 9) and a smaller wedge bull flag (Sep 25, Oct 9, and Oct 22).
  • If the market trades lower, they want the October 9 or August 1 lows to act as support.
  • The bulls need strong consecutive bull bars closing far above the 20-day EMA and breaking above the September 17 high to increase the odds of the bull trend resuming.
  • The EURUSD has been in a trading range for the past 89 trading days.
  • Traders may continue to BLSH (Buy Low, Sell High) within the range — buying near the lower third and selling near the upper third — until there is a strong breakout with sustained follow-through in either direction.
  • The market is currently trading around the middle of the range, an area of balance and a magnet.
  • Traders will see whether the bears can produce a stronger third leg sideways to down to retest the October 9 or August 1 lows.
  • Or if the market will continue stalling around the October 9 area, followed by a retest of the Sept 17 high in the weeks ahead instead.
  • For now, the pullback appears to be minor.

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