The daily chart of the EUR/USD formed a small wedge bottom over the past 2 weeks, and it is currently trading above yesterday’s small reversal bar. Yes, the news from Russia and Turkey will affect all markets. However, the wedge bottom was forming long before last night’s news, and I posted yesterday that a 150 pip rally was likely this week. Nothing has changed. There is a 60% chance of about a 150 pip rally beginning today or tomorrow. The swing up could reach the October 28 top of the 240 minute bear channel at around 1.1100.
The bears want the 240-minute chart’s bear channel to continue down to the April low, and it might. The consecutive sell climaxes and the buying at each new low make it more likely that there will be a swing up soon. Besides 1.0800, the minimum target is TBTL Ten Bars Two Legs sideways to up on the 240-minute chart, which is what happens about 60% of the time after a wedge bottom.
The 60-minute chart has not yet had a strong bear breakout, and the bears see the two day rally as a bear flag. The context is good for the bulls. When there is not clear bottom, there then is often a bull breakout above the bear flag, and then a measured move up. The bear flag is now about 70 pips tall. If the bulls get their breakout today or tomorrow, the 1.0800 target would be within reach.
Momentum favors the bears on the daily chart, but probability is beginning to favor the bulls on the 240- and 60-minute charts. Although the weak rally over the past 2 days means that the bulls are still mostly scalping, if there is a strong bull breakout, they will become more willing to hold for a swing up. Day traders will be watching for a bull breakout. If there is another leg down to a new low, bulls will buy the new low, just as they have done for the last several new lows on the 240-minute chart. When bulls consistently make money in a bear trend, the bear trend usually is transitioning into a trading range.