The daily chart of the EUR/USD has been in a tight bear channel for almost a month. The channel has had many doji bars and bars that largely overlapping prior bars. These are signs of a lack of conviction, and it makes the selloff more likely a bear leg in what will become a trading range than a bear trend with a lot lower to go before pulling back. The March and April lows are magnets that are pulling the Forex market down. The April low is about 60 pips below and the EUR/USD might be close enough so that it can no longer resist the magnetic pull. This means that many bulls will expect the test. If they are confident that they will be able to buy lower, many will stop buying and wait to buy lower. The result can be a fast move down to the targets, and then an attempt at a double bottom. It is close enough so that traders would see a rally from here as a double bottom with the April low.
There is no bottom yet, but because of the look of the selloff and the context (just above support), the odds or a rally to resistance is likely soon. The nearest resistance is the 20-day EMA and the 2 lower highs in the month long bear wedge, which are about 200 pips above. The wedge is getting tight and there is a smaller wedge forming within the month long wedge. This increases the chances for a breakout within a week or two. If there is a bear breakout, it will probably fail around the March or April low, and be followed by a rally to resistance.
What should traders expect? The wedge channel on the daily and 60-minute charts is a bear trend. The odds are that it will continue. Since it also is a sell climax, the odds are that there will be a bear rally soon. Traders keep buying every new low for scalps, and selling ever bull reversal attempt, expecting another new low.
Today is the final day of the month. The monthly candlestick pattern is a big bear bar closing on its low and breaking below an 8-bar (month) bear flag. However, the bear flag followed a 12-bar bear micro channel (12 bars where every high was below the high of the prior month. Also, every bar had a bear body, and several were big. This selloff was the breakout below a 7-year triangle. The selloff on the month chart has been climactic. This increases the chances that the bear flag will be the final bear flag before a reversal up to resistance. Possible resistance is the moving average, the top of the bear flag, and the bottom of the 7-year triangle. Since this is a monthly chart, any pullback from the sell climax could last about 10 bars and have 2 legs sideways to up. Ten bars on the monthly chart is about a year. However, the selloff below the bear flag could easily last several bars (months) before the pullback begins.