The forex market on the daily chart has been sideways for 4 days after pulling back from a small breakout above the Sept.10 high. The bulls see this as a High 1 bull flag. After last week’s strong rally, they expect at least a small 2nd leg sideways to up.
While they would like the rally to continue to far above the Sept. 1 high, they know that most strong legs in a trading range reverse. They therefore need a strong rally soon and consecutive closes above the September high. Otherwise, they will give up and the EUR/USD will reverse down from the top of the range, as it has many times before.
The bears know that there will probably be a test of Monday’s high before there is a swing down to the middle or low of the trading range. But, they hope that the reversal down began on Monday. However, in the absence of consecutive bear bars closing near their lows, it is more likely that there will have to be at least a micro double top before there is a test of the bottom of the range.
The probability favors at least a test up to around the Nov. 9 high. However, until there are a couple closes above or below the 4-month trading range, traders will continue to look for reversals every week or two.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market broke above yesterday’s high overnight. This triggered a weak High 1 bull flag buy signal on the daily chart. However, it reversed back down below yesterday’s high and the top of the 4-day tight trading range. It has been mostly sideways with a slightly bullish bias all night.
Day traders see today as a trading range day. They have been scalping up and down for 10 pips. Because today triggered a buy signal on the daily chart and the reversal down so far has formed a higher low, the day is slightly more bullish than bearish. The bulls want today to accelerate up and become a big bull trend day. That is unlikely at the moment. Alternatively, they want today to close above yesterday’s high. That would increase the chance of at least slightly higher prices on Monday.
The bears want the reversal down from above yesterday’s high to continue to below yesterday’s low. Today would then be an outside down day. That would increase the chance of lower prices on Monday. Alternatively, they want today to close below the open. Today would then have a bear body. At a minimum, they want today to close below yesterday’s high. That would reduce the chances of a strong rally on Monday.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.