The EUR/USD had a big bar yesterday. It has had many in its 18-month trading range. Yet, each failed to create a breakout.
The EUR/USD Forex chart rallied 200 points on the initial election results. Yet, it then sold off almost 400 pips from the high. In addition, the reversal down came from just below the August high. It therefore formed another lower high in the bear trend that began in May.
Because it is still in the 18-month trading range, the odds are that it will continue mostly sideways. Yet, the reversal down was so big, the odds are that it will trade lower. As a result, will this lead to a breakout below the Low 2 bear flag on the monthly chart? Since 5 of the past months were doji bars, the odds still favor more sideways trading on the monthly chart.
But, the reversal down yesterday was strong enough so that the bears will sell the 1st bounce. Therefore, the EUR/USD will probably be sideways to down for a few more days. Because the swings have been big, day traders are holding for 20 or more pips when scalping.
Overnight EUR/USD Forex
While the 60-minute chart has traded down since the election results, the selloff over the past 24 hours has had small, overlapping bars with prominent tails. In addition, the slope is becoming flatter. Therefore, these bars will probably be within a trading range. Furthermore, the chart is close to an area where it has reversed up several times this year. The odds favor small trading range trading today.
While it is possible that this will be the breakout attempt that finally succeeds, it is more likely to do what all the others up and down has down. Hence, the odds are that it will begin to go sideways over the next week and then bounce. The bulls will try to create a double bottom with the October 25 low.
If the next few days are small days and do not break strongly below, the odds are that the chart will test up to the November 8 low around 1.1000. That was the breakout point for yesterday’s big reversal down. In a trading range, markets usually go back above resistance. If the bears fail to get their breakout, then traders will bet on a continued trading range and buy.