The EUR/USD tested the top of the 2-month trading range in the European session in the past hour. It has pulled back with 30 minutes to go before the open of the NYSE. I have been writing every day since the December 3 bull trend reversal that the odds favored a trading range and then a 2nd leg up. The trading range has lasted 2 months. Those who trade the markets for a living see every strong rally and selloff within the trading range as just a test of the borders of the range and expect reversals.
This trading range has gone on for a long time so it is likely getting near the time when it will breakout. However, until there is a breakout, there is no breakout, and online day traders will assume that all of these breakout attempts up and down will fail. Bulls take profits near the top and bears begin to sell. Bears take profits near the bottom and bulls begin to buy. One side or the other will at some point change its behavior and create a successful breakout that will be followed by a measured move. The target would be a measured move based on the height of the trading range, which is about 200 pips.
The most recent dominant move on the daily chart was the bull trend reversal. As long as there is not a comparably strong bear move, the odds favor a bull breakout. With each bar that gets added to the range, the probability drifts down from its initial 60% to close to 50%, which is where it is today. The bulls still have a slight edge, but it is not great. Day traders will continue to fade moves up and down until there is a strong breakout. Because the EUR/USD is at the top of the range, traders will be ready to buy quickly if there is a strong breakout. So far, it has not happened. If the EUR/USD begins to selloff today or tomorrow, they will again look to sell for a test back to the middle or bottom of the range.
The breakout an hour ago was strong, but the follow-through has been bad. This is more consistent with a test of the top of a trading range that with a successful breakout. Traders need more information before they conclude one way or the other. The bulls need a strong breakout today or tomorrow. It is more likely that they will not get it and instead the EUR/USD will reverse back down into the trading range. If they do get it, the trading over the next several days will switch from the scalping of the past 2 months to swing trading on all time frames.