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Monthly EURUSD Wedge Pattern

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The market formed a monthly EURUSD wedge pattern (Apr 21, Jul 1, and Sept 17). The bears want the bear trend line and the upper third of the multi-year trading range to be areas of resistance. The bulls want a retest of the September 17 high, even if it only forms a lower high. If there is a pullback, the bulls want the August low area to act as support.

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly - Wedge, Bears Need Strong Bear Bars, Monthly EURUSD Wedge Pattern
  • The September monthly EURUSD candlestick was a bull doji closing below the middle of its range with a long tail above.
  • Last month, we said the market may trade a little higher to retest near the July 1 high. Traders would observe if the bulls could create a retest and breakout, or if the market would trade slightly higher but stall around the July 1 high area instead.
  • The market broke above the July 1 high, but there was no sustained follow-through buying.
  • Previously, the bulls had a breakout above the trading range (Apr) with subsequent follow-through buying.
  • They want a measured move based on the height of the trading range, which will take the market to the 2021 high area.
  • The move up (since Jan 13 low) is in a tight bull channel, indicating persistent buying.
  • The bulls want a retest of the September 17 high, even if it only forms a lower high.
  • The overlapping candlesticks in the last 5 months indicate a slight loss of buying momentum.
  • If there is a pullback, the bulls want the August low area to act as support.
  • The bears see the rally (Sept 17) as a bull leg and a buy vacuum within the multi-year trading range.
  • They want the market to form a major lower high (vs Jan 2021 high), followed by a reversal from a wedge pattern (Apr 21, Jul 1, and Sept 17).
  • They want the bear trend line and the upper third of the multi-year trading range to be areas of resistance.
  • They must create strong consecutive bear bars to show they are back in control.
  • The buying pressure since the January low is stronger (tight bull channel) compared to the weaker selling pressure (bear bar with no follow-through selling).
  • The wedge pattern (Apr 21, Jul 1, and Sept 17) and loss of momentum (overlapping candlesticks) could lead to a pullback within a few months.
  • For now, traders will see if the bulls can create a retest of the September 17 high, followed by a breakout above.
  • Or will the market continue to stall around the July 1 or September 17 high area, followed by a pullback towards the August low instead?

The Weekly EURUSD chart

EURUSD Weekly - No FT Selling, Retest High or 20-Week EMA
  • This week’s candlestick on the weekly EURUSD Forex chart was a small inside bull bar closing in its upper half with prominent tails.
  • Last week, we said traders would observe whether the bears could create strong follow-through selling, testing the 20-day EMA, or if the pullback would lack follow-through selling, trading mostly sideways with long tails below candlesticks instead.
  • The market traded sideways, and the bears couldn’t create a follow-through bear bar.
  • The bears want the upper third of the multi-year trading range, or the May 2021 high, to act as a resistance area. They want the move to form a lower high (vs Jan 2021).
  • They view the recent move (Sep 17) as a retest of the prior trend’s extreme high (Jul 1) and want a failed breakout.
  • They want a reversal from a higher high major trend reversal pattern and a wedge pattern (Apr 21, Jul 1, and Sept 17).
  • They must create consecutive bear bars closing near their lows, breaking far below the 20-week EMA, to increase the odds of a reversal.
  • If the market trades higher, they want it to stall below the September 17 high, forming a small double top.
  • The bulls got a larger wedge pattern (Apr 21, Jul 1, and Sept 17), but the breakout above the July 1 high was not strong.
  • They see the current move as a pullback and want it to be weak and sideways (long tails below candlesticks, doji(s), overlapping candlesticks).
  • If the market trades lower, they want the 20-week EMA or the August 1 low to act as support, forming a larger double bottom bull flag (with Aug 1).
  • The bulls need to create strong follow-through buying trading above the July 1 high to increase the odds of a resumption of the trend.
  • The recent breakout above the July 1 high was not strong.
  • The market has been trading in a tight trading range pattern in the last 12 weeks.
  • The buying pressure is slightly stronger (trending doji(s)), compared to the weaker selling pressure (limited follow-through selling).
  • For now, traders will see if the bears can create strong follow-through selling, testing the 20-day EMA.
  • Or will the pullback continue to lack follow-through selling? If this remains the case, the odds will swing in favor of a retest and breakout above the September 17 high in the weeks ahead.

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