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Weak EURUSD Breakout

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Market Overview: EURUSD Forex

The monthly chart formed a weak EURUSD breakout below the trading range with limited follow-through selling. The bears hope to get at least a small sideways to down leg to retest the recent leg extreme low (Jan 13). The bulls want a breakout above the 2-month trading range followed by a measured move (based on the height of the 2-month trading range).

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly - Limited FT Selling Below Trading Range, Weak EURUSD Breakout
  • The February monthly EURUSD candlestick was a bull inside bar closing around the middle of its range with a long tail above.
  • Last month, we said that traders would see if the bulls could get a strong entry bar and trade back into the trading range or if the market would continue to stall around the trading range low area, followed by a retest and breakout below the recent leg extreme low (Jan 13) instead.
  • The EURUSD spent most of the time trading in its upper half (of its candlestick) in February and formed a pullback in the last 3 days of the month.
  • The bears got a reversal from a double top bear flag (Dec 28 and Sept 25) and a larger double top bear flag (July 18 and Sept 25).
  • They want a strong breakout below the trading range (October 2023 low) followed by a measured move using the height of the trading range.
  • So far, the breakout and follow-through selling below the trading range low have been limited.
  • They hope to get at least a small sideways to down leg to retest the recent leg extreme low (Jan 13).
  • If the market trades higher, they hope the January 27 or December 6 high area will act as resistance.
  • The bulls see the move down to the January 13 low as a sell vacuum and a bear leg within a trading range.
  • They want a failed breakout below the trading range and a reversal from a large double bottom bull flag (Oct 3 and Jan 13) and a wedge (Oct 23, Nov 22, and Jan 13).
  • They hope the market will reverse to the middle of the trading range (around the 20-month EMA).
  • They want a breakout above the 2-month trading range followed by a measured move (based on the height of the 2-month trading range).
  • They must create a strong bull entry bar to increase the odds of the bull leg beginning.
  • If the market trades lower, they want it to form a higher low followed by a higher low major trend reversal.
  • So far, the follow-through selling following the breakout below the 25-month trading range is limited. The bears are not yet as strong as they hope to be.
  • The last two candlesticks have overlapping ranges which means the market is in a 2-month trading range.
  • Traders may BLSH (Buy Low, Sell High) within the 2-month trading range until a breakout with follow-through buying/selling.
  • Traders will see if the bulls can get a strong entry bar with follow-through buying.
  • Or will the market continue to stall sideways or form a retest of the recent leg extreme low (Jan 13) followed by a breakout instead?
  • Most breakouts from trading ranges fail and odds favor the trading range to continue.

The Weekly EURUSD chart

EURUSD Weekly - DT Bear Flag, Bears Need Follow-through
  • This week’s candlestick on the weekly EURUSD Forex chart was an outside bear bar closing near its low.
  • Last week, we said that traders would see if the bulls can create more follow-through buying trading far above the bear trend line and the 20-week EMA, or if the bears would be able to create a follow-through bear bar as the market continues to stall (around the 20-week EMA) instead.
  • The market traded slightly higher but stalled around the 20-week EMA and reversed lower.
  • The bulls see the whole move down (from Sept) as a sell vacuum and a bear leg within a trading range.
  • 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 need to create a strong breakout above the January 27 high and the 20-week EMA with follow-through buying to increase the odds of the bull leg beginning.
  • If the market trades lower, the bulls hope the market will form another higher low followed by a higher low major trend reversal.
  • They hope the February 3 low area will act as support.
  • The bears see the recent moves as a pullback.
  • They want a reversal from a double top bear flag (Jan 27 and Feb 26), or a wedge bear flag (Dec 6, Jan 27 and Feb 26) followed by a retest of the January 13 low.
  • They hope the 20-week EMA and the bear trend line will act as resistance. So far, this is the case.
  • They want a strong breakout (below the Jan 13 low), and a measured move based on the height of the recent 11-week trading range.
  • They need to create 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 11 weeks.
  • The bulls made several attempts to break above the January 27 high but were not successful.
  • The market may now do the opposite and test the lower third of the 11-week trading range instead.
  • Since this week’s candlestick is an outside bear bar closing near its low, it is a sell signal bar for next week.
  • The market may still trade at least a little lower.
  • Traders will see if the bears can create strong follow-through selling testing near the February 3 low area.
  • Or if the market will trade slightly lower but lack sustained follow-through selling 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.

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