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Weekly Shallow EURUSD Pullback

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Market Overview: EURUSD Forex

The market is forming a weekly shallow EURUSD pullback testing the breakout point (Aug/Sept highs). The bears want a failed breakout followed by a retest of the middle of the trading range. The bulls must create a breakout above the micro wedge with sustained follow-through buying to increase the odds of another leg up.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - Failed Breakout or Pullback, Weekly Shallow EURUSD Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing below the middle of its range with prominent tails.
  • Last week, we said traders would see if the bears could create follow-through selling over the next few weeks, or if the pullback phase would lack follow-through selling, trading sideways with long tails below candlesticks or bull bodies instead.
  • So far, the market has formed 3 consecutive bear bars. The pullback is relatively shallow as compared to the leg up before it.
  • The bears see the recent rally as a large 2-legged bull leg and a buy vacuum test of the trading range high.
  • They want a failed breakout followed by a retest of the middle of the trading range (around the 20-week EMA).
  • They want a reversal from a wedge pattern (Apr 3, Apr 11, and Apr 21).
  • If the market trades higher, they want it to form a lower high or a double top with the April 21 high.
  • They must create more follow-through selling to increase the odds of a failed breakout.
  • The bulls want a strong breakout followed by a measured move based on the height of the trading range. That would take the market to the 2021 high area.
  • They see the current pullback as a test of the breakout point (Aug/Sept highs).
  • They want the pullback to be weak, sideways, and lacking in follow-through selling (overlapping candlesticks, doji(s), bull bars, long tails below candlesticks).
  • They want the July and August/September highs to act as support.
  • They see the current move forming a micro wedge bull flag (Apr 23, May 1, and May 9).
  • They must create a breakout above the micro wedge with sustained follow-through buying to increase the odds of another leg up.
  • The move up (since the February 28 low) is in a tight bull channel with big bull bars and relatively small pullbacks, which indicates stronger buying pressure.
  • Most breakouts from trading ranges fail. Markets have inertia and tend to continue what they have been doing.
  • That means trading ranges (and trends) are resistant to change and tend to continue.
  • If the bears can create strong consecutive bear bars back into the trading range, the odds of a failed breakout and the bear leg beginning will increase.
  • However, if the bulls can create strong follow-through buying above the trading range, the odds of a successful breakout and a measured move will increase.
  • For now, traders will see if the bears can create more follow-through selling over the next few weeks.
  • Or will the pullback phase lack strong follow-through selling, remaining shallow and mostly trading sideways with long tails below candlesticks or bull bodies instead?

The Daily EURUSD chart

EURUSD Daily - Wedge Bull Flag or Failed Breakout
  • The EURUSD traded sideways early in the week. The EURUSD traded below the 20-day EMA on Thursday with limited follow-through selling on Friday.
  • Previously, we said traders would see if the bears could create strong consecutive bear bars trading back into the trading range and below the 20-day EMA, or if the pullback would be weak and sideways.
  • So far, the pullback appears more sideways with overlapping ranges.
  • The bulls want a strong breakout above the trading range, followed by a measured move based on the height of the trading range. That would take the market to near the 2021 high area.
  • They want the current pullback to be weak, sideways, and lacking in follow-through selling (overlapping candlesticks, doji(s), prominent tails below candlesticks).
  • They want the 20-day EMA, the August/September or the July highs to act as support.
  • They see the current move as a test of the breakout point (Aug/Sept highs).
  • They want a breakout above the wedge bear flag (Apr 23, May 1, and May 9), followed by another strong leg up.
  • The bears see the recent rally as a large 2-legged bull leg and a buy vacuum test of the trading range high.
  • They want a failed breakout followed by a retest of the middle of the trading range.
  • They want a reversal from a wedge pattern (Mar 18, Apr 3, and Apr 21) and a final flag.
  • If the market trades higher, they want it to form a lower high major trend reversal and a double top with the April 21 high.
  • The bears need to create strong follow-through selling trading back into the trading range to increase the odds of a failed breakout.
  • The move up since the February 28 low has been strong, with big consecutive bull bars and relatively weaker pullbacks indicating stronger buying pressure.
  • The move up to the April 21 high could still be a bull leg and a buy vacuum within the trading range.
  • Markets have inertia, and odds slightly favor the trading range to continue.
  • The bulls need to create sustained follow-through buying above the trading range to increase the odds of a successful breakout and a measured move.
  • For now, traders will see if the bears can create strong consecutive bear bars trading back into the trading range and below the 20-day EMA.
  • Or will the pullback continue to be weak and sideways? If this remains true, the odds of another leg up after the pullback increase.

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