The forex market on the daily chart is near the top of its 4-month trading range. Yesterday reversed down in an outside down day. The bears see yesterday as a failed breakout above the Sept. 10 high. They want this to be a double top and an Expanding Triangle top. The odds of a reversal down will go up if today is a 2nd consecutive big bear day closing near its low.
But the 4-day rally was strong. The bulls should get at least a small 2nd leg sideways to up this week. They want today to have a bull body. It would then be a better High 1 bull flag buy signal bar for tomorrow.
Everyone knows that there will eventually be a successful breakout of the 4-month trading range. In a trading range, reversals are always more likely. There have been many strong legs up and down for 4 months and each has reversed.
There is currently no reason to believe that the current rally will lead to a breakout above the Sept. 1 high, or a reversal down will successfully break below the Nov. 4 low.
Overnight EUR/USD Forex Trading
The 5-minute chart of the EUR/USD Forex market has been in a small range overnight. Since yesterday was an outside-down day at resistance, it is a sell signal bar for today. Today traded below yesterday’s low, which triggered the sell signal.
However, it only dipped slightly below that low before reversing up. This so far is a weak sell signal on the daily chart.
But the reversal up was weak as well. Traders are deciding if the EUR/USD will reverse down from resistance or have at least a small 2nd leg up after a 4-day rally.
Today will help them to decide. If today collapses, then traders will conclude that the EUR/USD will head down. But if it does not, traders will expect at least a small bounce up this week to again test the Sept. 10 high.
With the small overnight range, day traders have been scalping up and down. The fight today will be over today’s open and yesterday’s low. The bulls want today to have a bull body. That will increase the number of traders who will buy tomorrow. But if today has a bear body and closes below yesterday’s low, traders will look for at least slightly lower prices tomorrow.
Can today break into a trend? Yes, but since it triggered a sell signal and did not collapse or reverse up strongly, today will probably remain small and sideways.