The 240-minute chart shows a nested wedge rally where the 3rd leg subdivides into a small wedge, and that smaller wedge has a 3rd leg that also subdivides into an even smaller wedge.
The EUR/USD broke to a 4 month high overnight and is about 100 pips below the major October lower high of 1.1495. If it gets above that, it will probably then test the August 24 high of 1.1712, which was the start of the 5-month selloff, and the top of the year long trading range. It is the neck line of the double bottom of the past year. If the EUR/USD gets above it, there is a 50% chance that the breakout will fail and form a big 2 legged bear flag on the monthly chart. There is also a 50% chance that the EUR/USD will rally for a measured move up. Since the range is 1200 pips tall, that would project up to around 1.3000, which is the middle of the 10-year triangle.
The 4 day rally has been strong. The EUR/USD has rallied 90 pips overnight in a tight bull channel on the 5-minute chart. The 60-minute chart has had 10 consecutive bull-trend bars. While that is a sign of strength, it is unsustainable and therefore climactic. Buy climaxes are usually followed by trading ranges. With the uncertainty of tomorrow’s unemployment report, the EUR/USD will probably be sideways for at least 2 – 3 hours today, in an attempt to be more neutral (less bullish) going into the report. However, the bulls are clearly in control on the 60-minute chart, and the 1st reversal down will probably be minor.
A minor reversal means that it will be bought, and the best the bears can probably hope to see over the next 10 bars (hours) on the 60-minute chart is a trading range, and not a bear trend. Bulls will probably buy pullbacks, confident that the 1st reversal down will probably fail to fall far.
Even though the EUR/USD 5-minute chart is in a tight bull channel, bear scalpers have been able to make money buy selling above the prior high. They either sell at the prior high and sell more 10 pips higher, or they simply sell 10 pips higher. When there is a strong bull trend (here, a Small Pullback Bull Trend) and the bears are beginning to make money, day traders see that as the 1st sign that the trend might be evolving into a trading range. Bulls continue to buy pullbacks, but they are now taking profits above prior highs instead of holding onto their entire position. Bears will not sell with stops below bars until there is more selling pressure (more big bear bars and deeper pullbacks). However, that is the next step in the evolution into a trading range. If the EUR/USD falls 12 pips below a sell signal bar, the stop entry bears will have been able to make money. That is more evidence that the bull trend is becoming a trading range.
Those who trade the markets for a living know that while the 4-day rally has been strong, it is the 3rd push up from the December low, and it is a nested wedge (this 3rd push up from the March 10 low also has 3 legs; the 240-minute chart has even a smaller wedge within the 3rd leg of the 3rd leg). A nested top increases the chances of a TBTL Ten Bar Two Legged pullback at resistance, around the October 15 lower high.
Whenever a rally has 3 strong breakouts, as it has since December 3, the odds are that there will be a TBTL pullback rather than a strong breakout above resistance. Since the resistance is about 100 pips higher, and the 4-day rally has been strong, the odds are that there is more to go. The bears will probably need at least a micro double top before they can begin any pullback that lasts more than a couple of days.