The forex market on the daily chart has been in a trading range for 3 months after a buy climax. It is therefore currently also in an early bear trend and an early resumption of the 4-month bull trend. Traders see the chart as being in Breakout Mode. They are looking for reversals every week or two as they wait for a successful breakout.
Today so far is a big bull bar. The EUR/USD rallied from a double bottom bull flag with the Sept. 30 low. That low was the start of a small wedge rally and therefore a magnet.
If today closes near its high, it will increase the chance of higher prices tomorrow. Traders will look for a test of the Oct. 9 lower high.
A more important lower high is September 9. A bear trend needs lower highs. A break above that high would end the series of lower highs and therefore end the bear trend. The chart would then be in both a trading range and a bull trend.
Overnight EUR/USD Forex Trading
The 5 minute chart of the EUR/USD Forex market rallied strongly overnight. Day traders have only been buying, mostly for a swing up.
Because the rally has been climactic, the bulls will begin to take profits. If there is a 20–30-pip pullback, day traders will switch to buying selloffs for scalps and selling reversals down for scalps. This will probably begin within an hour because the 5 minute chart is extremely climactic and the day’s range is already fairly big.
Can today reverse down? Probably not. If it does, it will typically have to stop going up and enter a trading range for a couple hours first. The best the bears can reasonably hope to achieve it getting the day to close 20–30 pips down from the high. That would make tomorrow more likely to be sideways than up.