The Forex market on the daily chart reversed up strongly from a failed breakout below the bottom of the 4-month trading range. The bulls see this as a double bottom bull flag. Remember, I keep saying that reversals in a trading range are more likely than a successful breakout. This is another example.
The 2-day rally has been very strong. It should attract profit-taking today or tomorrow. That could lead to a 50 to 100-pip pullback. However, because the rally has been exceptional, there are many traders who are eager to buy a selloff. This should result in at least a small 2nd leg sideways to up.
The bulls want a strong breakout above the October 21 lower high and especially above the September 1 top of the 4-month range. If they get 2 closes above the range, traders will look for a test of the next resistance. That is the February 2018 high, above 1.25.
Can the EUR/USD abruptly reverse down to below yesterday’s low. Probably not. There should be at least a small 2nd leg up.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market has rallied in a strong bull trend overnight. Because the rally has been parabolic and the day’s range is huge, many bulls will start to take profits. This should result in a 30 to 50-pip pullback within the next couple hours.
Once there is a 30 to 50-pip pullback, traders will expect the bull trend to transition into a trading range. At that point, some day traders will also sell rallies. But even after it evolves into a trading range, day traders will still prefer to buy pullbacks over selling rallies for the 1st couple hours.
There is an at 11 am PST today. That can lead to a big move up or down in any financial market. Day traders should exit positions ahead of the report and wait at least 10 minutes before resuming trading.
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