The EUR/USD daily Forex chart pulled back overnight. If it closes with a bull body today, today’s candlestick will be a High 1 bull flag for tomorrow.
The EUR/USD daily Forex chart has rallied strongly for 6 weeks. But, it is now at the top of its 5 month trading range. Furthermore, the 3 week rally has had 3 small legs up in a tight bull channel. That is a parabolic wedge buy climax at resistance.
Typically, the chart sells off for a couple small legs over the next week or so and tests the beginning of the channel. That is the September 10 low, just above 1.15.
It is important to note that most reversals over the past 5 months began with micro double tops or bottoms. Therefore, that is likely here. Consequently, the bulls will probably trigger their bull flag buy signal tomorrow by going above today’s high. However, the rally will probably fail within a couple days, forming a micro double top with Friday’s high. Wednesday’s FOMC announcement could be the catalyst for the minor reversal down.
While the daily chart has been in a trading range for 5 months, it is now likely also in a bull trend. Most trading range breakouts fail. Therefore, a pullback this week is more likely than a bull breakout. Because the daily chart is now in a bull trend, bull surprises are more likely. Traders need to be ready for a bull breakout above the June 14 high at any time.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute chart has been sideways in an 80 pip range for 2 days. After rallying 50 pips at the start of the European session, the chart has been in a tight range for 5 hours. The fight now is over the close of the day. The bulls want today to close on its high. This would create a stronger buy signal bar for tomorrow. However, the bears want a weak close. While the chance of a successful breakout above the June 14 high will be greater if today closes on its high, the odds still favor a micro double top with Friday’s high. Therefore, day traders will sell rallies.
Since Friday was not a strong sell setup on the daily chart, the bulls will buy reversals up from around Friday’s low. Since there is a buy climax and a pullback is likely this week, they will scalp for 10 – 20 pips. With bulls and bears scalping, today will probably continue the 5 hour trading range, although the range will probably get bigger at some point today.