The EUR/USD 240 minute Forex chart got its 2nd leg up from the double bottom overnight. Yet, the chart is still in the middle of a 6 month trading range. The bears expect the 6 month trading range to continue. The bulls need a breakout above lower highs.
The EUR/USD is at the apex of nested triangles on the daily chart. the reversal up from a double bottom last Wednesday was strong. The odds therefore favored a 2nd leg sideways to up. While Friday’s weak rally was a 2nd leg, it is more likely part of a trading range after the 1st leg up.
The rally on the 60 minute chart had many bars with prominent tails and many reversals. This means that it is probably a bull leg in a trading range after the 1st leg up ended on Thursday. This means the the EUR/USD might have to test Friday’s low before it begins its 2nd leg up. A reversal up from a selloff down to Friday’s low would create a double bottom. Hence, it would increase the chances of an clear 2nd leg up.
Overnight EUR/USD Forex sessions
Last week I said that the September 22 rally from the double bottom was strong enough to make it likely that bulls would buy the 1st selloff, create a higher low, and then have a 2nd leg up. They accomplished their goal overnight. Yet, the EUR/USD Forex daily chart is in the middle of nested trading ranges for the past 18 months. Therefore, every rally and selloff is likely to reverse. Hence, the odds are that this one is near its end. As a result, a couple of legs sideways to down from this wedge rally is more likely than a gap above last week’s September 22 high and then a measured move up to above the lower highs.
Every trading range eventually breaks into a trend. Especially relevant is that 80% of the attempts fail. Trading ranges constantly have very strong legs that appear to be the start of a trend. Yet, it is easier to make money expecting them to reverse. Therefore, the 5 minute chart will probably stall here today and go sideways.
Furthermore, the uncertainty of tonight’s debate will also probably inhibit a continued rally. However, after the debate, there might then be a breakout up or down that could last several days.