The forex market on the daily chart has sold off for 4 days. The bears hope this is the resumption of the bear trend that began with the Sept. 1 high.
However, trading ranges have lots of strong legs up and down, and each is more likely to reverse than lead to a trend. That is true here. The bulls want a double bottom with the Oct. 15 low. After 4 bear days, they will probably need at least a micro double bottom before they can get a leg up. That means traders expect at least a small 2nd leg sideways to down.
This is the 4th test of 1.17, and the Sept. 25 low is a magnet below. Even if the EUR/USD bounces for a day or two, traders expect a break below 1.17 and a test of the September low just above 1.16. The bulls will try to get a reversal up there, at the bottom of the range.
If the bears get a couple closes below1.17, the EUR/USD will probably fall to 1.16. If they get a couple closes below the September low, the EURUSD will probably test down to the breakout point on the weekly chart at the Mar. 9 high, just below 1.15.
Overnight EURUSD Forex trading
The 5-minute chart of the EUR/USD Forex market sold off again last night down to 1.17, which it tested 3 other times in the past 5 weeks. Since it has been support, it might stall here today.
The overnight selloff was a Bear Spike and Parabolic Wedge Bear Channel. That is a sell climax pattern and it usually transitions into a trading range. The top of the range is typically around the start of the parabolic bear channel, which is above 1.1730.
But the bear channel has been tight. Day traders have only been selling. The bulls need the market to stop going down and start going sideways. If it does, day traders will start to buy for 10-pip scalps. If there is a trading range with a good buy signal bar, day traders will be willing to hold part of their position for a possible test of 1.1740.
The bears want the overnight bear trend to continue to far below 1.17. Because the overnight selloff is in a sell climax pattern, it is more likely that it will evolve into a trading range.
If it enters a trading range, it will be in Breakout Mode
But if it does enter a trading range, it will be in Breakout Mode. Yes, the bulls will want a trend reversal up from support. But the bears see the trading range as a bear flag. They hope that the bear trend will resume and break far below 1.17 today.
Since the day’s range is already about average and the 4-day selloff is extreme and at support, today will probably enter a trading range for the rest of the day. The bears will try to get today to close below the October 15 low of 1.1689. That would increase the chance of lower prices tomorrow.
However, the bulls want today to close 20 to 30 pips above the day’s low. That would make the bears take some profits and increase the chance of sideways to up trading tomorrow.