The EUR/USD is oversold on the daily chart after falling in a series of sell climaxes. It is also at the bottom of a wedge bear channel on the 240-minute chart. The odds favor several days up over the next week. The first target is the November 12 lower high just above 1.0800. The bulls are trying to create a reasonable bottom on the 60-minute or 240-minute charts. The rally from yesterday’s lower low major trend reversal is still in effect, and some bulls are holding onto longs for another 100 pips higher. Bulls who are currently flat are looking to buy above a strong higher low candlestick buy signal bar,
The bears know that the EUR/USD is oversold. They also know that it can get much more oversold before there is any pullback. The current bear leg that began on October 15 is 900 pips tall. This means that bears need to risk 900 pips to their stops above that level. Most will not risk that much. Some will either use a tighter stop. Others will begin to take profits. If enough take profits, the result will be a pullback, which is likely soon. The bears will see a 5 – 10 day pullback as a bear flag and expect a new low. If they get their new low, they can then tighten their stops to above the bear flag.
If the bulls can make the pullback grow to 20 or more bars, they will have lowered the probability for the bears to 50%. They will then have a 50% chance of a bull breakout above the developing trading range and then a measured move up.
Although the odds favor a pullback staring within the next few days, at the moment, the odds also favor it not lasting too long before the bear trend resumes down to test the April and March lows.