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EUR/USD: Will Bull Breakout of Bear Flag Signal Major Trend Reversal?

Published 03/06/2023, 09:45 AM
Updated 07/09/2023, 06:31 AM
EUR/USD
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EUR/USD Daily Chart

  • The EUR/USD pair may get a bull breakout of a bear flag over the next few days and a measured move up (blue line).
  • The bears have a Low two short below March 2nd. However, it failed to trigger. In general, Low two shorts are second-entry shorts and reasonable trades.
  • However, this context is different because it forces traders to sell at the bottom of a likely trading range. This will increase the probability of buyers below.
  • It is common to get bull breakouts of bear flags at the bottom of trading ranges and bear breakouts of bull flags at the top.
  • The bears likely need a lower high significant trend reversal if they are going to get the market to go much lower. This means that the bears do nigh mind a rally if it is not too strong and leads to a lower higher.
  • The bulls want a strong bull breakout over the next few days and a rally above the February high.
  • The bulls have a credible argument for a strong breakout. While they will likely be disappointed, the market will continue sideways.
  • The bulls see the rally up to the February high as being in a tight bear channel. The weekly chart sold off near the buy zone, where traders will begin to buy and scale in lower, hoping for a significant trend reversal.
  • The problem the bulls have is that the selloff down to the February low is tight and will likely lead to more sideways trading instead of straight up.
  • Overall, traders will pay close attention to the entry bar today following Friday’s stop entry buy. The bulls want a big entry bar closing above March 1st, and the bears want to disappoint the bulls.

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