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EURUSD Two-Legged Sideways Pullback

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Market Overview: EURUSD Forex

The market formed a EURUSD two-legged sideways pullback on the weekly chart. Bulls want the December 24 high or the 20-week EMA to hold as support, followed by a retest of the January 27 high and a sustained breakout above it. Bears need consecutive strong bear bars closing below the 20-week EMA to flip the market to Always In Short.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - Bears Need FT Selling, Bulls Want DB BF, EURUSD Two-Legged Sideways Pullback
  • This week formed a bear bar closing in its lower half, testing the February 6 low.
  • Last week, we said traders would watch whether bulls could generate follow-through buying to retest the January 27 high, or whether bears would create a second leg sideways to down to retest the February 6 low.
  • Bulls previously broke above the September 17 high (January 27) but failed to generate follow-through buying.
  • Bulls see the current move as a two-legged pullback forming a double bottom bull flag (February 6 and February 19).
  • They want the pullback to remain weak and sideways, with overlapping bars, long tails below, and strong bull bars.
  • Bulls want the December 24 high or the 20-week EMA to hold as support, followed by a retest of the January 27 high and a sustained breakout above it.
  • They are looking for a measured move toward the 2021 high, based on the height of the 7-month trading range.
  • Bulls need consecutive strong bull bars breaking above the September 17 high and the bear trend line (not shown; drawn across the February 2018 and January 2021 highs) to increase the odds of trend resumption.
  • Bears want the breakout above the September 17 high to fail, followed by a two-legged sideways to down pullback.
  • They want at least a small second leg sideways to down to retest the February 6 low. That second leg appear to be underway.
  • Bears want a retest of the January low.
  • Bears need consecutive strong bear bars closing below the 20-week EMA to flip the market to Always In Short.
  • If the market trades higher, bears want the February 11 high to act as resistance, forming a double top bear flag.
  • The market broke above the 36-week trading range (January 27) but failed and reversed back into it.
  • The market remains within a 36-week trading range. Until there is a clear breakout with strong follow-through, traders may continue to Buy Low, Sell High (BLSH), buying near the lower third and selling near the upper third of the range.
  • Traders will watch whether bears can generate further follow-through selling to test the 20-week EMA.
  • Or whether the market stalls around the December 24 high or the 20-week EMA, forming a higher low instead.

The Daily EURUSD chart

EURUSD Daily - Bulls Want DB BF, Bears Need FT Selling
  • EURUSD traded sideways to down below the 20-day EMA. Thursday and Friday formed consecutive dojis.
  • Last week, we said traders would watch whether bulls could create a second leg sideways to up to retest the January 27 high, or whether bears would create a second leg sideways to down below the February 6 low.
  • Bears want a reversal from a higher high major trend reversal, following the trend channel line overshoot on January 27, and a lower high major trend reversal (February 10).
  • They want a strong leg down to retest the January low.
  • If the market trades higher, bears want the February 10 high to act as resistance, forming a double top bear flag.
  • Bears need consecutive strong bear bars to flip the market into Always In Short.
  • Bulls see the current move as a two-legged breakout pullback testing the December 24 breakout point.
  • They want a reversal from a double bottom bull flag (February 6 and February 19), followed by another strong leg up.
  • Bulls need consecutive strong bull bars with sustained follow-through buying to increase the odds of a successful breakout above the trading range.
  • They want the 20-day EMA and the December 24 high area to hold as support.
  • If the market trades lower, bulls want the bull trend line to act as support.
  • EURUSD broke above the trading range (January 27), but follow-through buying has been limited.
  • The market then formed a two-legged sideways to down pullback back into the range.
  • EURUSD remains in a trading range. Until there is a strong breakout with sustained follow-through, traders may continue to Buy Low, Sell High (BLSH), buying near the lower third and selling near the upper third of the range.
  • For now, traders will watch whether bears can generate further follow-through selling below the February 6 low toward the January low.
  • Or will the pullback remain mostly sideways, followed by bull bars retesting the January 27 high instead?

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