The rally in the EUR/USD continue overnight, and it has now reached a leg 1 = leg 2 measured move target from the December 3 bull trend reversal. That is the 1st target for the bulls, and it might result in some profit taking. On the 60-minute chart, there was a tight trading range after yesterday’s buy climax, and that often becomes the final bull flag before a pullback. The rally over the past 6 hours has been in a tight bull channel and it accelerated until an hour ago.
This is a buy climax and it increases the chance of at least a couple of hours of sideways to down trading and the evolution into a trading range today. The swing up since yesterday morning has been big, which means that if a trading range is starting, the legs will be big enough for swing traders to try for 50 pips, and scalpers to try for 20 pips today. If the EUR/USD enters a tight trading range, scalpers will take only 10 pips profit and they will look to enter with limit orders, selling above prior highs and buying below prior lows.
While it is possible that the rally could continue all day today, climactic price action is more likely to evolve into trading range price action once it gets near resistance. The current rally has reached a leg 1 = leg 2 measured move target on the daily chart, and it is also around the measured move based on the height of the 2 month trading range. With the channel as tight as it is, the stop for the bulls is far below. This means that the bulls have to reduce their position sizes to keep their risk at an acceptable level. When the bulls begin to take profits, the bull trend evolves into a trading range. That is likely to begin today, and probably last several days.