The EUR/USD daily Forex chart broke below the 4 month trading range last week, but had a bull bar closing near its high on Friday. In addition, the bulls have a wedge bear channel. That is a bull flag. They hope that the selloff is just another failed breakout attempt.
But, the bull trend reversal bar on Friday had a prominent tail on top. It did not close on its high. In addition, is was not especially big compared to the 6 day selloff. Consequently, many bulls will want to see a micro double bottom this week before they will be willing to buy. That limits the upside today and tomorrow.
The bears need follow-through selling. Friday was not a 2nd consecutive big bear day closing on its low and below the November low. The bears therefore were not strong enough to create a consensus that a bear trend was underway.
Today will be a Low 1 bear flag sell signal bar for tomorrow. If today closes on its low, bears will sell below today’s how and try again to establish a successful breakout.
More likely, today will disappoint the bears and a small trading range will form this week. That means that there will be both a micro double bottom and a micro double top. That would give both the bulls and bears a credible setup. One side will win, and it will control the next leg for at least several days.
Brexit will probably be postponed
Trading ranges are notoriously successful at preventing successful breakouts. Markets have inertia and tend to continue to do what they have been doing. While the bear breakout slightly increases the chance of a bear trend, the bears need to do more. Since the final decision on Brexit will probably be postponed again, the breakout will probably have to wait at least several more weeks.
Overnight EUR/USD Forex trading
The EUR/USD 5-minute Forex chart has been in a 25 pip trading range for overnight. Most of the time, the range was only 10 – 15 pips. That makes it difficult even for scalpers to make month. Since the next few days will probably be sideways, day traders will look for reversals and 10 – 20 pip scalps.