The 240-minute EUR/USD Forex chart has a sell climax down to a measured move target. It is also just above the December 2015 low. There is a 60% chance of a bear rally soon. It will probably last at least a couple of weeks.
The EUR/USD sell climax has no bottom yet. Furthermore, there is still room to the December 2015 low. Yet, because of the extreme selling, the odds are that the bears will take at least partial profits soon. When the protective stop is far, as it is now, bears will want to reduce risk. The easiest way is to take some profits.
As a result of the extreme selling, the correction might rally for more bars and more pips that what seems likely. Hence, the bulls might get a 2-week rally that tests a major lower high or the October 25 breakout point. Therefore, it could last 200 points.
For the bulls to get a trend reversal instead of a bear rally, they will probably need a major trend reversal on the 60 minute chart. That would probably take at least 2 weeks to develop.
Possible Breakout Below 18-Month Trading Range
While the selloff has strong momentum, it is still above prior lows. It is still above the bottom of the 18-month trading range. Until the bears get a strong breakout below the range, the odds are that this selloff will probably be simply another leg within the range.
Obviously, the range will eventually break out. Yet, the odds favor at least a 2 week rally before the bears will be able to succeed. Furthermore, the odds are that they will fail, and the trading range will continue longer than what bears want.
Overnight Forex Trading
The 2-day rally has had 3 pushes up. It is therefore a wedge bear flag. Yet, because it is in a parabolic wedge sell climax at support, there is a 40% chance of a bull breakout above the bear flag. Furthermore, there is a 60% chance of either that bull breakout or a reversal up after a bear breakout. The 2-day rally would therefore become the Final Bear Flag.
The bears want a strong breakout below the December 2015 low. Yet, this climactic selloff will attract profit takers. The risk to the protective stop is too great for many institutions. While it is possible for the bears to get their big breakout without a bounce, a 2-week rally is more likely. Hence, if the EUR/USD falls below that December 2015 low, the breakout will probably be brief and lead to a 2-week rally.