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Weekly EURUSD Bulls Need Follow-through Buying

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Market Overview: EURUSD Forex

The weekly EURUSD bulls need follow-through buying and a breakout above the January 27 high trading far above the bear trend line and the 20-week EMA to increase the odds of the bull leg beginning. The bears want a reversal from a double top bear flag (Jan 27 and Feb 14), or a wedge bear flag (Dec 6, Jan 27 and Feb 14) followed by a retest of the January 13 low.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - Bears Want DT Bear Flag, Bulls Need BO, Weekly EURUSD Bulls Need Follow-through Buying
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear doji closing in its upper half with a long tail below.
  • Last week, we said the market may still trade a little higher. Traders would see if the bulls could create more follow-through buying trading far above the bear trend line and the 20-week EMA or if the market would trade slightly higher but stall around the 20-week EMA or the December 6 high areas instead.
  • The market traded lower in the first half of the week, but the follow-through selling was not yet strong.
  • The bulls see the whole move down (from Sept) as a sell vacuum and a bear leg within a trading range.
  • They see the recent move (Feb 3) as a retest of the prior trend’s extreme low and want a higher low major trend reversal.
  • They want a failed breakout (below the trading range) followed by a retest of the middle of the trading range (near the Nov 6 high area).
  • They must create a breakout above the January 27 high with follow-through buying trading far above the bear trend line and the 20-week EMA to increase the odds of the bull leg beginning.
  • The bears see the current move as a pullback.
  • They want a reversal from a double top bear flag (Jan 27 and Feb 14), or a wedge bear flag (Dec 6, Jan 27 and Feb 14) followed by a retest of the January 13 low.
  • They hope the 20-week EMA and the bear trend line will act as resistance.
  • They want a strong breakout (below the trading range), and a measured move based on the height of the trading range.
  • The problem with the bear’s case is that the breakout and follow-through selling below the trading range has been limited.
  • They need to create strong consecutive bear bars closing near their lows to increase the odds of a successful breakout.
  • So far, the market has traded sideways in the last 10 weeks.
  • The buying pressure since the January 13 low is stronger (big bull bar, consecutive bull bars) compared to the weaker selling pressure (bear bar with limited follow-through selling).
  • Since this week’s candlestick is an inside bear doji, the market is in breakout mode.
  • The bulls want a breakout above, while the bears want a breakout below the inside bar.
  • Traders will see if the bulls can create more follow-through buying trading far above the bear trend line and the 20-week EMA.
  • Or will the bears be able to create a follow-through bear bar as the market continues to stall around the 20-week EMA instead?
  • Most breakouts from trading ranges fail and odds favor the trading range to continue.
  • The longer the bears fail to create follow-through selling below the trading range, the more the odds will swing in favor of a bull leg trading back into the trading range.

The Daily EURUSD chart

EURUSD Daily - Bulls Need BO, Bears Want DT - Wedge BF
  • The EURUSD traded lower in the first half of the week testing the 20-day EMA. Thursday traded higher with Friday closing as a bear bar near its low. The market traded sideways for the week.
  • Last week, we said the buying pressure since the January 13 low is slightly stronger. Traders would see if the bulls could create a breakout above the January 27 high with sustained follow-through buying, or if the market would trade slightly higher but stall around the January 27 or December 6 high area instead.
  • The bulls see the whole move since September as a sell vacuum and a bear leg testing the trading range low.
  • They want a failed breakout (below the trading range) and a reversal from a wedge pattern (Oct 23, Nov 22, and Jan 13), an embedded wedge (Dec 13, Jan 2, and Jan 13) and a higher low major trend reversal (Feb 3).
  • They want a breakout above the January 27 high followed by a measured move based on the height of the 10-week trading range.
  • They must create follow-through buying trading far above the January 27 and December 6 highs to increase the odds of the bull leg beginning.
  • If the market trades lower, they want the 20-day EMA to act as support.
  • The bears see the current move as a pullback and want a reversal from a double top bear flag (Jan 27 and Feb 14) or a wedge bear flag (Dec 6, Jan 27 and Feb 14).
  • They hope that the January 27 or December 6 highs will act as resistance and to get a retest of the January 13 low followed by a breakout below.
  • So far, the follow-through selling following the breakout below the trading range has been limited.
  • They need to create strong consecutive bear bars to show that they are back in control.
  • The market has traded sideways in the last 10 weeks.
  • The buying pressure since the January 13 low is slightly stronger (consecutive bull bars, bigger bull bars) compared to the weaker selling pressure (bear bars with limited follow-through selling).
  • For now, traders will see if the bulls can create a breakout above the January 27 high with sustained follow-through buying.
  • Or will the bears be able to create a bear leg to retest near the January 13 low area instead?
  • Most breakouts from trading ranges fail and odds favor the trading range to continue.

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