The 60-minute chart of the EUR/USD is oversold. Last week’s bear channel is starting to evolve into a trading range and the selloff is still above the bottom of the bull leg that began on August 19. The bulls are hoping that the trading range will create a successful major trend reversal for a swing trade up, and the odds are that it will. The 5-minute chart has been in a trading range overnight, but above Friday’s low. This is a higher low major trend reversal on the 60-minute chart (head-and-shoulders bottom). These bottoms have a 40% chance of being the start of a swing up, lasting at least 2 legs and 10 bars, and rallying for a measured move up. This would be a rally lasting a day or two, and the neckline is 400 pips above last night’s higher low. A measured move up would be another 400 pips. However, until there is a strong bull breakout, this trading range is still only another bear flag and bears will continue to sell all reversal attempts. Traders learning how to trade the markets should watch for a strong bull breakout today or tomorrow and then look to buy for a swing trade. Some of those who trade Forex markets for a living will simply by above any decent signal bar. The probability of a profitable trade is less, but so is the risk. They often will make several attempts at an early entry into what they hope will be a bull swing.
The daily chart of the USD/CAD is in a tight channel and is trying to evolve into a trading range. It has had 3 pushes up and therefore a wedge top. However, the third push up was strong enough so that there might be one more push up before a pullback into a trading range. While it is possible for this price action to continue up for many more pushes and to even have a bull breakout, the odds favor a bear breakout below the bull channel and at least 10 bars and 2 legs sideways to down to the bottom of the wedge, which is about 400 pips lower. The bears need a sell candlestick pattern or a strong bear breakout, which they have not yet had. Aggressive bears have been selling new highs on the 60- and 240-minute charts for 50 to 100 pip scalps. However, most traders cannot risk about 200 pips and cannot scale in higher, which is the best way to trade countertrend in this situation.