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Weekly EURUSD Two-Legged Pullback

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Market Overview: EURUSD Forex

The market formed a weekly EURUSD two-legged pullback testing the 20-week EMA. The bears want another leg down to form the wedge pattern (with the first two legs being Jul 17 and Aug 1 lows). The bulls want a retest and breakout above the July 1 high, followed by a resumption of the trend from a double bottom bull flag (Jul 17 and Aug 1) and a 20-gap bar buy setup.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - PB, Retest High or 3rd Leg Down, Weekly EURUSD Two-Legged Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was an inside bull bar with prominent tails above and below.
  • Last week, we said traders would see if the bears could create more follow-through selling or if the pullback would be weak, holding above the 20-week EMA.
  • So far, the pullback has overlapping ranges and is holding above the 20-week EMA.
  • The bears see the recent move (Jul 1) as a bull leg and a buy vacuum test of the multi-year trading range high. They want the move to form a lower high (vs Jan 2021).
  • They want the upper third of the multi-year trading range, or the May 2021 high, to act as a resistance area.
  • They want a TBTL (Ten Bars, Two Legs) pullback lasting a few weeks.
  • So far, they got a 2-legged pullback following the wedge (Mar 18, Apr 21, and Jul 1) and embedded wedge (May 26, Jun 12, and Jul 1) patterns.
  • They want another leg down to form the wedge pattern (with the first two legs being Jul 17 and Aug 1 lows).
  • If the market trades higher, they want it to form a double top bear flag with the July 24 high.
  • Previously, the bulls got a strong move up in the form of a tight bull channel.
  • They want another leg up to form the larger wedge pattern, with the first two legs being April 21 and July 1 highs.
  • They want a measured move (based on the height of the trading range), which will take the market to the 2021 high area.
  • They see the current move as a two-legged pullback and hope that it has alleviated the recent overbought condition.
  • They want a retest and breakout above the July 1 high, followed by a resumption of the trend from a double bottom bull flag (Jul 17 and Aug 1) and a 20-gap bar buy setup.
  • They want the 20-week EMA and the bull trend line to act as supports.
  • So far, the move up (Jul 1) was in a tight bull channel, which means strong bulls.
  • The current pullback (Aug 1) has overlapping candlesticks, bull bars, and prominent tails below candlesticks, indicating that the bears are not yet as strong as they had hoped.
  • For now, the pullback appears to be minor.
  • Traders will see if the bears can create more follow-through selling.
  • Or will the pullback remain weak (sideways with overlapping ranges, bull bars, prominent tails below candlesticks) and holding above the 20-week EMA instead? If this remains the case, the odds of a retest and breakout above the July 1 high will increase within a few weeks.

The Daily EURUSD chart

EURUSD Daily - Retest High or 3rd Leg Down
  • The market traded sideways to up for the week, closing slightly above the 20-day EMA.
  • Previously, we said traders would see if the bulls could create strong follow-through buying and a breakout above the July 1 high, or if the market would stall around the July 1 high area, followed by a second leg sideways to down instead.
  • The bears got a two-legged pullback following the large wedge pattern (Mar 18, Apr 21, and Jul 1) and embedded wedge (May 26, Jun 12, and Jul 1).
  • They see this week as a pullback (Aug 7) and want another sideways to down leg to form the wedge pattern (with the first two legs being July 17 and Aug 1 lows).
  • They want a retest of the August 1 low followed by a strong breakout below it.
  • If the market trades higher, they want it to stall around the July 24 high, forming a double top bear flag.
  • They must create strong consecutive bear bars trading far below the 20-day EMA and the bear trend line to show they are back in control.
  • The bulls want a measured move (based on the height of the trading range), which will take the market to the 2021 high area.
  • They see the recent move (Aug 1) as a two-legged pullback and hope that it has alleviated the prior overbought condition.
  • They want another leg up to form the larger wedge pattern, with the first two legs being April 21 and July 1 highs.
  • They want a retest and breakout above the July 1 high, followed by a resumption of the trend.
  • If the market trades lower, they want the August 1 low and the bull trend line to act as supports, forming a wedge bull flag (the first two legs being July 17 and Aug 1 lows).
  • So far, the prior move (Jul 1) was strong (in a tight bull channel), which means strong bulls.
  • The recent pullback (Aug 1) appears relatively weaker compared to the prior leg up (May 12 to Jul 1). The pullback may only be minor.
  • For now, traders will see if the bulls can create more follow-through buying to retest the July 1 high.
  • Or will the market stall below the July 24 high, followed by a third leg sideways to down instead?

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