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Weekly EURUSD Breakout Pullback

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Market Overview: EURUSD Forex

The market formed a weekly EURUSD breakout pullback in the last 2 weeks. The bears want a retest of the trading range low followed by a strong breakout and measured move based on the height of the trading range. The bulls want a failed breakout and the trading range low to act as support followed by a retest of the middle of the trading range (around the 20-week EMA).

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly - BO Pullback, Bulls Want Another Leg Up, Weekly EURUSD Breakout Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was a doji bar closing in its upper half.
  • Last week, we said the market may still be in the sideways to up pullback phase. Traders would see if the bulls could create a strong bull entry bar (a follow-through bull bar) or if the market would trade slightly higher but close with a bear body or a long tail above.
  • The market traded above last week’s high but closed as a doji bar and has a lot of overlapping range with the previous week’s candlestick.
  • Previously, the bears got a strong bear leg breaking below the trading range low.
  • They see the last two weeks as a breakout pullback. They want a retest of the trading range low followed by a strong breakout and measured move based on the height of the trading range.
  • Because of the strong leg down (from Sept), the bears expect to get (at least) a small sideways to down leg to retest the recent extreme low (Nov 22) after the pullback.
  • They want another leg down to complete the wedge pattern (the first two legs being Oct 23 and Nov 22).
  • The bulls see the move to the November 22 low as a sell vacuum and a bear leg within a trading range.
  • They want a failed breakout and the trading range low to act as support followed by a retest of the middle of the trading range (around the 20-week EMA).
  • They want a reversal from a large double bottom bull flag (Oct 3 and Nov 22).
  • While this week traded slightly higher, the bulls couldn’t get a strong entry bar and a follow-through bull bar.
  • They hope this week was simply a pullback and want at least another sideways to up leg (a two-legged pullback) to retest near the 20-week EMA area.
  • If the market trades lower, they see it as a retest of the prior leg’s extreme low and want a higher low major trend reversal and a small double bottom with the November 22 low.
  • They must create consecutive bull bars closing near their highs to indicate that they are back in control.
  • Since this week’s candlestick is a doji bar, it is not a strong signal bar for next week.
  • For now, the market may still be in the sideways to up pullback phase.
  • Traders will see if the bulls can create another leg higher (a two-legged pullback) and close with a strong bull bar.
  • Or if the market will trade slightly higher but close with a bear body or a long tail above instead?
  • The prior bear leg was strong and in a tight bear channel. The odds still slightly favor at least a small sideways to down leg after the current pullback.
  • The longer the bulls can maintain a sideways to up leg by creating strong bull bars (and bear bars with no follow-through selling), the more the odds will swing in favor of a failed breakout and the bull leg beginning.
  • Most breakouts from trading ranges fail and odds favor the trading range to continue.
  • The market is trading around the lower third of the trading range which can be the buy zone of trading range traders.
  • The EURUSD is in a 108-week trading range. (Trading range high: July 2023, low: October 2023). 
  • Traders will BLSH (Buy Low, Sell High) within a trading range until a breakout with follow-through selling/buying.

The Daily EURUSD chart

EURUSD Daily - BO Pullback, Bulls Want 3- or 4-Legged Pullback
  • The EURUSD traded lower on Monday but lacked follow-through selling. The market then traded sideways to up for the week. Friday traded higher but closed as a bear bar with prominent tails, closing below the 20-day EMA.
  • Previously, we said that the move down while strong, may still only be a sell vacuum within a trading range. Most breakouts from trading ranges fail and odds favor the trading range to continue. The odds favor at least a small second leg sideways to down after a pullback.
  • The bulls see the move down to the November 22 low as a sell vacuum and a bear leg testing the trading range low.
  • They want a reversal from a large double bottom bull flag (Oct 3 and Nov 22) and a parabolic wedge (Nov 6, Nov 14, and Nov 22) to the middle of the trading range.
  • They want a failed breakout and hope that the trading range low will act as support.
  • If the market trades lower, they want a higher low major trend reversal and a double bottom with the November 22 low.
  • They must create consecutive bull bars closing near their highs trading far above the 20-day EMA to indicate that they are back in control.
  • Previously, the bears got a strong second leg sideways to down breaking below the trading range low.
  • The move down was in a tight bear channel. That means strong bears.
  • They see the current move as a breakout pullback (a two- or three-legged pullback). They want a retest of the trading range low followed by a breakout and a measured move down based on the height of the trading range.
  • The bears expect to get at least a small second leg sideways to down to retest the recent leg extreme low (Nov 22), even if it only forms a higher low.
  • They want the 20-day EMA or the bear trend line to act as resistance.
  • So far, the pullback has the shape of a double top bear flag (Nov 29 and Dec 6). Some pullbacks can have 3 pushes or more (a wedge bear flag or Low 4).
  • Because of the strong move down, odds slightly favor at least a small sideways to down leg to retest the November 22 low after the pullback, even if it forms a higher low.
  • For now, traders will see if the bulls can create another leg up, completing the wedge bear flag (with the first two legs being Nov 29 and Dec 6).
  • Or will the market stall around the 20-day EMA or the bear trend line followed by a retest of the November 22 low within a few weeks?
  • The low of the large trading range can be the buy zone of trading range traders.
  • The move down while strong, may still only be a sell vacuum within a trading range. Most breakouts from trading ranges fail and odds favor the trading range to continue.
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until a breakout with follow-through selling/buying.

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