Market Overview: EURUSD Forex
The market formed a monthly EURUSD bull breakout above the trading range. The bulls must create a follow-through bull bar in May to increase the odds of a successful breakout. The bears want a failed breakout followed by a retest of the middle of the trading range.
EURUSD Forex market
The Monthly EURUSD Forex chart
- The April monthly EURUSD candlestick was a big bull bar closing in its upper half with a long tail above.
- Last month, we said traders would see if the bulls could get a strong follow-through bull bar in April, or if the market would stall near the trading range high area and close the April candlestick with a long tail above or a bear body instead.
- The bulls got a strong follow-through bull bar breaking above the trading range. The long tail above the candlestick indicates the bulls are not as strong as they hope to be.
- They want a strong breakout above the trading range followed by a measured move based on the height of the trading range which will take the market to the 2021 high area.
- They must create a follow-through bull bar in May to increase the odds of a successful breakout.
- The bears see the current move 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).
- 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.
- 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 follow-through bull bar in May.
- Or will the market form an inside bar or a bear bar closing near its low and trading back into the trading range instead?
The Weekly EURUSD chart
- This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing in its lower half with a small tail below.
- Last week, we said traders would see if the bears could create a strong bear entry bar, or if the market would trade slightly lower, but lack follow-through selling, closing with a long tail or a bull body instead.
- The bears got a small bear entry bar. They see the recent rally 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 want a reversal from a wedge pattern (Apr 3, Apr 11, and Apr 21).
- They must create more follow-through selling to increase the odds of a failed breakout.
- If the market trades higher, they want it to form a lower high or a double top with the April 21 high.
- The bulls want a strong breakout followed by a measured move based on the height of the trading range. That would take the market to the 2021 high area.
- They see the current pullback as a test of the breakout point.
- They want the pullback to be weak, sideways, and lacking in follow-through selling (overlapping candlesticks, doji(s), bull bars, long tails below candlesticks).
- They want the July and August/September highs to act as support.
- They must create sustained follow-through buying to increase the odds of a measured move-up.
- The move up (since the February 28 low) is in a tight bull channel with big bull bars and relatively small pullbacks which indicates stronger buying pressure.
- 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.
- Traders will see if the bears can create follow-through selling over the next few weeks.
- If the bears can create strong consecutive bear bars back into the trading range, the odds of a failed breakout and the bear leg beginning will increase.
- Or will the pullback phase lack follow-through selling, trading sideways with long tails below candlesticks or bull bodies instead?
- If the bulls can create strong follow-through buying above the trading range, the odds of a successful breakout and a measured move will increase.
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