The EUR/USD daily Forex chart has been in a tight range for 6 days. The bears want this to be the top of a bear flag. They then want a break below the November low and 1.12.
However, the bulls either want a bull breakout above the bull flag, or a bear breakout and then a double bottom with the February low. Since most trading range breakout attempts fail, the bull case is more likely. But, it is only slightly so.
This is because the 4-month range is about twice as long as every other range over the past 2 years. Consequently, it is likely to break out soon. The continuation of the trading range means the odds favor a leg up after the February leg down.
But the extreme duration of the range increases the chance of an impending successful breakout. That breakout has a 50% chance of being down. The result is that the probability now only slightly favors a continuation of the range instead of a bear breakout.
Over the past 2 weeks, almost every leg up and down reversed after 2 – 3 weeks. Therefore, the odds favor a test down by the end of next week. If there is one more push above last week’s high and then a reversal down, the bears would have a wedge bear flag. That is a reliable pattern. However, the selloff would probably form a higher low.
Overnight EUR/USD Forex Trading
Today is the 5th day in a 50-pip-tall tight trading range. When the range is small like that, it means day traders are scalping. Since there is no sign of a breakout of this 6-day range, day traders will continue to scalp.
The odds favor a break of the 6 day range within a week. But there will probably be sellers above 1.14 because that would be about a 50% pullback, and the 3-week rally is still a bear flag. Also, a reversal there would lead to a test of the February low, which is likely.
There will also likely be buyers below 1.13. That would be about a 50% pullback of the 3-week rally and a test of a Big Round Number.
With buyers below and sellers above, even a breakout this week will probably not go very far.