Market Overview: EURUSD Forex
The market formed a EURUSD lower high major trend reversal on the weekly chart. The bears must create a strong bear entry bar with sustained follow-through selling to show they are back in control. If the market trades lower, the bulls want it to form a double bottom bull flag with the May 12 low and the 20-week EMA to act as support.
EURUSD Forex market
The Weekly EURUSD chart
- This week’s candlestick on the weekly EURUSD Forex chart was a bull bar closing in its lower half with a long tail above.
- Last week, we said traders would see if the bulls could create follow-through buying testing near the April 21 high, or if the follow-through buying would be disappointing for the bulls instead.
- The market traded higher but formed a pullback to close below last week’s high.
- The bears see the rally to the April 21 high as a large 2-legged bull leg and a buy vacuum test of the trading range high.
- They see the current move as a retest of the April 21 high and want it to form a lower high major trend reversal or a double top.
- They want a failed breakout followed by a retest of the middle of the trading range.
- They want at least a small second leg sideways to down to retest the May 12 low.
- They must create a strong bear entry bar with sustained follow-through selling to show they are back in control.
- The bulls want a retest of the April 21 high, followed by a strong breakout and a measured move based on the height of the trading range. That would take the market to the 2021 high area.
- They see the recent leg (May 12) as a 50% pullback of the move which started from the March 27 low.
- They want another big leg up to complete the wedge pattern, with the first two legs being March 18 and April 21.
- They must create strong follow-through buying over the next few weeks to increase the odds of a successful breakout.
- If the market trades lower, they want it to form a double bottom bull flag with the May 12 low and the 20-week EMA to act as support.
- The move up (Feb 28 low to Apr 21 high) was in a tight bull channel with big bull bars.
- The pullback from the April 21 high to the May 12 low, while persistent, was relatively weaker than the leg up before it (Mar 27 low to Apr 21 high).
- Traders expect a retest of the April 21 high, even if it forms a lower high. It has done so.
- So far, the retest is forming a lower high with weak candlesticks (tails above candlesticks, doji).
- The long tail above this week’s candlestick indicates selling activity. That means some traders did not wait for the market to break above the prior swing high (April 21) before selling.
- 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.
- The bulls must create strong follow-through buying breaking above the April 21 high to increase the odds of a successful breakout.
- If the move lacks strong follow-through buying (overlapping candlesticks, doji(s), inside bars, long tails above candlesticks), and forms a lower high, the odds of a lower high major trend reversal or a double top will increase.
- Since this week’s candlestick closed in its lower half with a long tail above, it can be a sell signal bar for next week.
- For now, traders will see if the bears can create a strong bear entry bar.
- Or will the follow-through selling be weak and the candlestick close with a long tail below or with a bull body instead?
The Daily EURUSD chart
- The EURUSD traded sideways to up above the 20-day EMA for the week. Friday formed a pullback lower.
- Previously, we said traders would see if the bulls could create strong follow-through buying, testing the April 21 high, or if the move would be weak (overlapping candlesticks, doji(s), bear bars, long tails above candlesticks), forming a lower high instead?
- The market is forming a retest of the April 21 high. The move has a lot of overlapping candlesticks indicating the bulls are not as strong as they hoped yet.
- The bulls want a retest of the April 21 high, followed by a strong breakout and 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 third leg up to complete the large wedge pattern, with the first two legs being March 18 and April 21.
- They need to create strong consecutive bull bars closing near their highs to increase the odds of a successful breakout.
- If the market trades lower, they want the 20-day EMA or the May 12 low area to act as support, forming a double bottom bull flag.
- The bears see the rally to the April 21 high as a large 2-legged bull leg and a buy vacuum test of the trading range high.
- They see the current move as a retest of the prior high (Apr 21) and want it to form a lower high major trend reversal and a double top.
- They want a failed breakout followed by a retest of the middle of the trading range.
- They want a reversal from a wedge bear flag (May 14, May 21, and May 23) to retest the May 12 low.
- They need to create strong consecutive bear bars breaking below the wedge bear flag to show they are back in control.
- So far, the retest of the April 21 high has overlapping candlesticks which indicates the bulls are not as strong as the prior leg up.
- If this continues to be the case, the odds of a lower high major trend reversal or a double top will increase.
- The wedge pattern increases the odds of a pullback towards the May 12 low.
- The move to the April 21 high while strong could be a bull leg and a buy vacuum in the trading range.
- Markets have inertia, and odds slightly favor the trading range to continue.
- For now, traders will see if the bears can create strong bear bars breaking below the wedge bear flag (May 14, May 21, and May 23).
- Or will the follow-through selling be limited and the market continue to trade around the 20-day EMA instead?
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