The forex market on the daily chart has had 2 small legs up from the low this week. There is already a wedge bear channel that began with the small bull bar on Sept. 24. But if this rally is just a bear flag and a test of resistance at the EMA and Sept. 17 low, there might be one more small bull day left in the next couple days.
If today or Monday is a big bull day that closes near its high and far above the Sept. 17 low, traders will conclude that last week’s bear breakout failed. The EUR/USD would be back its 2-month trading range. For traders to conclude that the July bull trend is resuming, they will need a strong break above the Sept. 1 high.
For 2 months, the bars have been small, the legs up and down have lasted only a week or so, and many bars have had prominent tails. This is trading range price action, which reduces the chance of a big breakout in either direction. Traders continue to look for reversals. They exit in a few days and then look for another another trade in either direction.
This week is a bull bar on the weekly chart. The bulls want the week to close near the high of the week, which is yesterday’s high. If it does, that will increase the chance that last week’s bear breakout failed, and it would increase the chance of higher prices next week. If this week has a big tail on top, which it currently has (not shown), traders will look for more sideways trading next week.
Overnight EUR/USD Forex Trading
The 5-minute chart of the EUR/USD Forex market traded below yesterday’s low, but reversed up. Yesterday was a Low 1 sell signal bar on the daily chart, but it had a bull body. Traders expected that there would be more buyers than sellers below its low.
The reversal up was not particularly strong and the EURUSD has been in a 40-pip tall trading range for most of the session. The trading range is currently a triangle. Day traders are buying reversals up from the low and selling reversals down from the high, and they are scalping.
The 2 bull overnight legs were stronger than the bear legs. That reduces the chance of a bear trend day.
The fight today will be over the close. The bears want today to close near its low and below yesterday’s low. That will increase the chance of lower prices next week. The bulls want the day and week to close near its high. That will increase the chance of higher prices next week.
