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Large Weekly EURUSD Double Bottom Bull Flag

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Market Overview: EURUSD Forex

The market is forming a large weekly EURUSD double bottom bull flag (Aug 1 and Oct 9). The bulls want the 20-week EMA or the August 1 low to act as support. The bears must create consecutive bear bars closing near their lows, breaking far below the 20-week EMA and the August 1 low to increase the odds of a reversal.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - Test 20-Week EMA, Bears Need FT Selling, Large Weekly EURUSD Double Bottom Bull Flag
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing below the middle of its range with a long tail below.
  • Last week, we said traders would observe whether the bears could create strong follow-through selling, testing the 20-day EMA, or if the pullback would continue to lack follow-through selling.
  • The bears managed to get a second leg sideways to down testig the 20-week EMA but closed above it.
  • They want the upper third of the multi-year trading range, or the May 2021 high, to act as a resistance area. They want the move to form a lower high (vs Jan 2021).
  • They view the recent move (Sep 17) as a retest of the prior trend’s extreme high (Jul 1) and want a failed breakout.
  • They want a reversal from a higher high major trend reversal pattern and a wedge pattern (Apr 21, Jul 1, and Sept 17).
  • They must create consecutive bear bars closing near their lows, breaking far below the 20-week EMA and the August 1 low to increase the odds of a reversal.
  • If the market trades higher, they want it to stall below the September 17 high, forming a small double top.
  • The bulls got a large wedge pattern (Apr 21, Jul 1, and Sept 17), but the breakout above the July 1 high was not strong.
  • They see the current move as a pullback and want it to be weak and sideways (long tails below candlesticks, doji(s), overlapping candlesticks).
  • They want the 20-week EMA or the August 1 low to act as support, forming a larger double bottom bull flag (Aug 1 and Oct 9).
  • The bulls need to create strong consecutive bull bars trading above the July 1 high to increase the odds of a resumption of the trend.
  • So far, the market could still be in the sideways to down minor pullback phase.
  • The market has been trading in a trading range for the last 17 weeks.
  • Traders may BLSH (Buy Low, Sell High) within the trading range. That means buying in the lower third and selling in the upper third of the trading range until a strong breakout from either direction with sustained follow-through movement.
  • For now, traders will see if the bears can create more follow-through selling, breaking below the 20-day EMA.
  • Or will the pullback phase lack follow-through selling, stalling above the 20-week EMA or the August 1 low area instead? If this remains the case, the odds of the pullback being minor, followed by a retest of the recent high (Sept 17) will increase.

The Daily EURUSD chart

EURUSD Daily - Wedge, Bears Need Strong FT Selling
  • The market traded lower for the week, followed by a pullback on Friday.
  • Previously, we said the market could still be in the sideways to down pullback phase. Traders would observe whether the bears could create sustained follow-through selling below the 20-day EMA, or if the pullback would be weak and trading mostly sideways within the prior trading range instead.
  • The bears created some follow-through selling below the 20-day EMA, but the move is still within the prior trading range.
  • They view the recent move (Sep 17) as a retest of the prior high (Jul 1) and a failed breakout.
  • They want a reversal from a higher high major trend reversal, and a large wedge pattern (Apr 21, Jul 1, and Sep 17).
  • They must create strong consecutive bear bars trading far below the 20-day EMA and the August 1 low to increase the odds of a reversal.
  • If the market trades higher, they want the 20-day EMA or the bear trend line to act as resistance, followed by another sideways to down leg to form the wedge pattern (first two legs being Sept 25 and Oct 9).
  • The bulls got another leg up, forming the large wedge pattern (Apr 21, Jul 1, and Sep 17), but the third leg up (Sep 17) lacked sustained follow-through buying above the July 1 high.
  • They see the current move as a two-legged pullback (Sep 25 and Oct 9).
  • If the market trades lower, they want the August 1 low to act as support, forming a large double bottom bull flag (with Aug 1) and a smaller wedge bull flag (the first two legs being Sep 25 and Oct 9).
  • They need to create strong consecutive bull bars to show they are back in control.
  • So far, the market has formed a two-legged pullback (Sep 25 and Oct 9), trading below the 20-day EMA.
  • The market could still be in the sideways to down pullback phase.
  • For now, the pullback may only be minor.
  • The market has been in a trading range in the last 87 trading days. Traders may BLSH (Buy Low, Sell High) within the trading range.
  • That means buying from the lower third and selling from the upper third of the trading range until a strong breakout from either direction with sustained follow-through movement.
  • Traders will see if the bears can create sustained follow-through selling, breaking below the August 1 low. If the market trades slightly higher but lacks strong follow-through buying (perhaps stalling around the 20-day EMA), traders may then look for a third leg sideways to down.
  • Or will the market stall and reverse above the 20-day EMA instead?

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