Market Overview: EURUSD Forex
The EURUSD bulls need to do more to show that they are at least temporarily back in control by creating consecutive bull bars closing near their highs trading far above the bear trend line. The bears want a strong breakout below the trading range low and a measured move based on the height of the trading range.
EURUSD Forex market
The Weekly EURUSD chart
- This week’s candlestick on the weekly EURUSD Forex chart was a bull bar closing around the middle of its range with tails above and below.
- Last week, we said that the market may still trade at least a little lower. Traders would see if the bears could continue to create follow-through selling or if the market would stall and form a minor pullback (bounce) in the next few weeks instead.
- The market traded lower early in the week but reversed to close with a bull body.
- The bears got another leg down creating the wedge pattern (Oct 23, Nov 22, and Jan 13).
- They want a strong breakout below the trading range low and a measured move based on the height of the trading range.
- The candlesticks following the breakout below the trading range (the last 3 candlesticks) have a lot of overlapping range which indicates the bears are not as strong as they hope to be.
- They must create sustained follow-through selling to increase the odds of a measured move down.
- If the market trades higher, they want a double top bear flag with the December 6 high and the 20-week EMA to act as resistance.
- The bulls see the move down as a sell vacuum and a bear leg within a trading range.
- They want a reversal from a large double bottom bull flag (Oct 3 and Jan 13), a wedge pattern (Oct 23, Nov 22, and Jan 13) and a lower low major trend reversal.
- They also see a micro wedge (Dec 2, Dec 10, and Dec 13).
- They want a failed breakout followed by a retest of the middle of the trading range.
- They must create consecutive bull bars closing near their highs trading far above the bear trend line to indicate that they are back in control.
- The last 3 candlesticks have a lot of overlapping ranges, which indicates a loss of momentum.
- The wedge and micro wedge increase the odds of a minor pullback (bounce) within the next few weeks.
- The bulls need to do more to show that they are back in control, at least temporarily.
- For now, traders will see if the bulls can create a pullback breaking far above the bear trend line.
- Or will the market continue to trade sideways to down below the bear trend line?
- The move down since September is in a tight bear channel.
- The selling pressure is stronger (consecutive bear bars, big bear bars closing in its lower half) than the weaker buying pressure (bull bars with limited or no follow-through buying).
- The odds slightly favor any pullback to be minor and at least a small second leg sideways to down to retest the current leg extreme low (Jan 13).
- Most breakouts from trading ranges fail and odds favor the trading range to continue.
- However, the longer the market trades below the trading range low with sustained follow-through selling, the more the odds will swing in favor of a successful breakout and a measured move down.
The Daily EURUSD chart
- The EURUSD traded lower on Monday but reversed into a bull doji closing near its high. The market then tested the 20-day EMA on Wednesday followed by sideways trading.
- Last week, we said that the odds slightly favor the market to still be in the sideways to down phase. Traders would see if the bears could continue to create more follow-through selling or if the bulls would be able to create a pullback into the trading range instead.
- The bears got the third leg sideways to down trading below the trading range low (Oct 23, Nov 22, and Jan 13).
- They want a strong breakout below the trading range followed by a measured move based on the height of the trading range.
- If the market trades higher, they want a double top bear flag (with the January 6 or December 6 highs) followed by at least a small sideways to down leg to retest the current leg extreme low (Jan 13).
- They want the 20-day EMA or the bear trend line to act as resistance.
- The Bulls have seen the whole move since September as a sell vacuum and a bear leg testing the trading range low.
- They want a failed breakout and a reversal from a wedge pattern (Oct 23, Nov 22, and Jan 13) and an embedded wedge (Dec 13, Jan 2, and Jan 13).
- The problem with the bulls’ case is that they have not yet been able to create sustained follow-through buying trading far above the 20-day EMA and the bear trend line.
- They must create consecutive bull bars closing near their highs trading far above the 20-day EMA and the bear trend line to indicate they are back in control.
- So far, the market is trading lower in a tight bear channel which means persistent selling and strong bears.
- The move down has also lasted a long time. The wedge pattern and the embedded wedge increase the odds of a minor pullback within a few weeks.
- For now, traders will see if the bulls can create a two-legged sideways to up pullback testing near the December 6 high area.
- Or will the market continue to trade below the bear trend line or the 20-day EMA instead? If this is the case, we will likely get another strong leg down thereafter.
- Most breakouts from trading ranges fail and odds favor the trading range to continue.
- However, the longer the market trades below the trading range with follow-through selling, the more the odds will swing in favor of a successful breakout and a measured move down.
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