The EUR/USD daily chart is continuing down in its attempt to test the April high low, or the March low. The selloff over the past month has had many big bear trend bars, but each has had bad follow-through. This is more common when a bear trend is beginning to convert into a trading range than when it will fall much further.
The 240-minute chart has fallen in a channel after the October 22 strong bear breakout (spike down). A spike and channel pattern usually evolves into a trading range. There have been several new lows over the past 2 weeks, and bull buying at and below the prior low have made money. In strong bear trends, it is usually difficult for bulls to make money. When bulls are consistently able to make money in a bear trend, the trend is usually beginning to convert into a trading range.
The 240-minute chart is still making lower highs and lows, and it is still in a bear trend. The 1st target for the bears is the April low, which is now only 80 pips below last night’s low. The EUR/USD can get there this week and still be within the bear channel. However, the EUR/USD 240 minute chart is so oversold that it can break above the bear channel and its lower highs at anytime. If it does, bears will see the end of the lower highs as the start of a trading range, and they will take profits. Bulls will see this as a potential start of a swing up that could last a couple of weeks or more. They will become more willing to hold onto their longs and more eager to buy pullbacks. The first target for the bulls is last week’s lower high above 1.0800. If they can break above that, the next target is the top of the bear wedge channel, which is above 1.1000.
The EUR/USD is still in a bear trend on the 240-minute chart. However, a wedge channel has a 75% chance of a bull breakout followed by a 1 – 3 week trading range or swing up, and only a 25% chance of a bear breakout and acceleration downward. There is no clear bottom yet. However, traders should be ready for a bull breakout that will probably begin this week. If it is strong, the bulls might get their targets. If it is weak, the bears will see it as a trading range. They will sell the bear flag and expect a drop below the March low.