Market Overview: EURUSD Forex
The market formed the third push up this week creating the weekly EURUSD wedge top. Bears want a reversal from a wedge top (July 1, September 17, and January 27) and a trend channel line overshoot (January 27). Bulls need strong follow-through buying well above the September 17 high and the bear trend line to increase the odds of a bull trend resumption.
EURUSD Forex market
The Monthly EURUSD Forex chart
- The January EURUSD monthly candlestick was an outside bull bar closing near the middle of its range, with prominent tails.
- Last month, we said traders would watch whether bulls could produce strong follow-through buying in January to test the September 17 high, or whether the market would stall below that high and form a second leg sideways to down.
- Bulls broke above the September 17 high, but the long upper tail shows the bulls are not yet decisively strong.
- Bulls view the November 5 move as a pullback in a bull trend and want a trend resumption from a double bottom bull flag (August 1 and November 5) or a wedge bull flag (August 1, November 5 and January 19).
- They need strong follow-through buying well above the September 17 high and the bear trend line to increase the odds of a bull trend resumption.
- If the market trades lower, bulls want a higher low relative to the November 5 low, forming the third leg of a developing wedge bull flag.
- Bears see the current move (January 27) as a retest of the prior high (September 17) and the bear trend line (drawn across the February 2018 and January 2021 highs).
- They want the rally to form a major lower high relative to the January 2021 high, which remains the case so far.
- Bears see the entire move from the January 2025 low to the January 27, 2026 high as a spike and channel.
- They want a reversal from a wedge top (July 1, September 17, and January 27) and a trend channel line overshoot (January 27).
- They want a deep pullback that retests the start of the channel (May 12), ending the spike and channel phase and transitioning into a trading range.
- Bears need consecutive strong bear bars to flip the market into Always In Short.
- If the market trades higher, bears want the bear trend line and the upper third of the multi-year trading range to act as resistance.
- The market is trading at a potential resistance area near the bear trend line and the upper third of the multi-year trading range, where trading range sellers may appear.
- So far, the buying pressure since the January low has been stronger (tight bull channel, more bull bars) than the selling pressure (bear bars with no follow-through).
- The relatively small January body with long upper and lower tails makes the candlestick functionally a doji, which is a 1-bar trading range. In trading ranges, traders typically buy near the low and sell near the high.
- The last eight candlesticks have mostly overlapping ranges, indicating active participation from both bulls and bears within the 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 bulls can produce more follow-through buying, closing above the September 17 high and the bear trend line.
- Or whether the market stalls and pulls back to test the January or November lows instead.
The Weekly EURUSD chart
- This week’s EURUSD candlestick was a doji closing near its low with a long upper tail. It can also be seen as a reversal bar, although the small bear body is less ideal.
- Last week, we said traders would watch whether bulls could generate follow-through buying above the September 17 high or whether the market would stall around that level.
- The market broke above the September 17 high, but follow-through buying was limited. The long upper tail shows rejection of higher prices and increases the risk of a failed breakout.
- Bulls got a reversal from a wedge bull flag (August 1, November 5, and January 19).
- They want a measured move up toward the 2021 high based on the height of the recent 7-month trading range.
- If the market trades lower, bulls want the December 24 high area or the 20-week EMA to act as support.
- They want any pullback to be weak and sideways, with overlapping candlesticks, long tails below bars, and prominent bull bars.
- Bulls need sustained follow-through buying 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 see the current move as a buy vacuum test of the September 17 high and the bear trend line (not shown).
- Bears want a failed breakout above the September 17 high followed by a 2-legged sideways to down pullback.
- They see this week’s candlestick as a possible setup reversal bar after a failed breakout above a prior swing high and a trend channel line overshoot (January 27).
- Bears need strong consecutive bear bars to flip the market into Always In Short.
- If the market trades higher in the coming weeks, bears want it to form a lower high relative to the January 27 high.
- The market broke out above the 32-week trading range this week but failed and reversed back into the 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.
- This week’s candlestick could be a setup reversal bar for next week. It is near the high of the 7-month trading range, which is a typical sell zone for trading range bears.
- The market could trade at least a little lower.
- Traders will watch whether bears can create a strong sell entry bar closing near its low and testing the 20-week EMA, which would increase the odds of a 2-legged sideways to down pullback.
- Or will the market trade lower but close with a long tail below or a bull body, setting up a retest of the September 17 high instead?
Market analysis reports archive
You can access all weekend reports on the Market Analysis page.
