Market Overview: EURUSD Forex
The EURUSD bulls need more follow-through buying trading above the April 21 high. The bears want the market to form a lower high or a double top with the April 21 high.
EURUSD Forex market
The Monthly EURUSD Forex chart
- The May monthly EURUSD candlestick was a bull doji closing in its upper half with a long tail below.
- Last month, we said traders would see if the bulls could create a follow-through bull bar in May, or if the market would form an inside bar or a bear bar closing near its low and trading back into the trading range instead.
- The market traded back into the trading range earlier in the month but reversed to form a follow-through bull doji.
- The bulls got some follow-through buying in May.
- Previously, they got a big bull bar breaking above the trading range.
- They want a strong breakout and a measured move based on the height of the trading range which will take the market to the 2021 high area.
- The current move is in a 5-bar bull microchannel. That means persistent buying.
- They want a retest of the April 21 high and a resumption of the move in June.
- The bears see the rally (April 21) as a bull leg and a buy vacuum test of the trading range high.
- They want a failed breakout followed by a retest of the middle of the trading range (around the 20-month EMA).
- If the market trades higher, they want it to form a lower high or a double top with the April 21 high.
- They must create strong bear bars to show they are back in control.
- So far, the bulls have a breakout above the top of the trading range with some follow-through buying.
- As strong as the move is, it could still be a bull leg and a buy vacuum within the trading range.
- Markets have inertia. Most breakouts from trading ranges fail and odds slightly favor the trading range to continue.
- However, if the bulls can create follow-through buying, that would increase the odds of higher prices and possibly a measured move-up.
- For now, traders will see if the bulls can create a strong retest and breakout above the April 21 high, closing June as a strong bull bar.
- Or will the market trade slightly higher, but stall around the April 21 high area and close with a long tail or a bear body instead?
- If this is the case, especially if June closes as a strong bear bar, the odds of a failed breakout will increase.
The Weekly EURUSD chart
- 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 traders would see if the bulls could create a follow-through bull bar testing near the April 21 high, or if the market would lack follow-through buying.
- The market traded higher earlier in the week but formed a pullback. The follow-through selling in the pullback was limited and the market closed in its upper half.
- 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 want a failed breakout followed by a retest of the middle of the trading range.
- They recently got a pullback trading back into the trading range in a 4-bar bear microchannel.
- They want at least a small second leg sideways to down leg to retest the May 12 low.
- 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 must create strong bear bars 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 see this week simply as a pullback and want at least another leg up next week testing near the April 21 high.
- They must create strong follow-through buying over the next few weeks to increase the odds of a successful breakout.
- 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).
- 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 to retest the April 21 high to increase the odds of a successful breakout.
- If the market trades slightly higher but 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.
- For now, traders will see if the bulls can create follow-through buying testing near the April 21 high.
- Or will the follow-through buying be disappointing for the bulls instead?
Market analysis reports archive
You can access all weekend reports on the Market Analysis page.
