The EUR/USD has been in a tight bear channel for 15 days. This is unsustainable and therefore climactic, but climaxes can go a long way before they transition into a trading range. While it is possible that the selling continues the the January bottom of the trading range around 10710 without a pullback, it is more likely that it will begin to go sideways for at least several day first after so many days down. The February 6 high went only 1 pip above the February 19 low.
This is a type of gap. When there is any overlap, the gap is actually closed. However, when the overlap is tiny like this, I call this a negative gap, and it is almost as reliable as a gap that stays open. The market has fallen for 4 days since then. The bears are hoping that the gap is a measuring gap. A measured move down from the February 11 top of the bear leg project to around 1.0760, which is just below the January 21 higher low and just above the January 5 bottom of the 2-month trading range.
The EUR/USD is still in a trading range. When there are 2 support levels close to one another at the bottom of the range, a market often reverses up after falling below one, but not the other. If that were to happen, the bottom would be around the measured move target.
Clearly the selloff has been strong and there is no bottom yet. However, it is climactic and it is getting close to support about 80 pips below. It can begin to stabilize any day now. For example, it might enter a tight trading range over the next several days. If it then has a bear breakout, the tight trading range might then be the final bear flag of the selloff, and the bear breakout might then reverse up from the measured move target.
The 240-minute chart has been slightly down for the past 2 days, but mostly in a tight trading range. This might be the start of that potential final bear flag. Since the channel down is tight and has lasted a long time (about 100 bars), a sharp reversal up can come at any time. However, because the channel is tight, the reversal up will probably be minor and become a bull leg within a bear flag. The bulls will probably need a Major Trend Reversal before they can get a 200 pip bounce that will test the February 22 gap (the February 26 high).
The 5 minute chart has been in a 50 pip trading range for 24 hours. This means that day traders are buying low, selling high, and scalping for 10 – 20 pips. Many are entering with limit orders, buying below prior lows in the bottom of the range and selling above prior highs in the top 3rd of the range. Some are using wide stops and scaling in.
If there is a strong breakout up or down, they will swing trade. Without that breakout, today will probably continue as a limit order scalper’s market.