The daily chart of the EUR/USD has had 8 consecutive doji bars in a tight trading range. However, last night reversed down from a 3rd push up in that range, and therefore triggered a wedge top reversal. There was a bear breakout over the last hour, but the EUR/USD 60-minute chart is still in a bull channel. The bears need a breakout below the April 6 low. That was the most recent strong bull reversal, and many traders will change their minds below that major higher low. If the EUR/USD 60-minute chart is no longer making higher lows, it is no longer in a bull trend. It is then either in a trading range or a bear trend. A strong breakout below would increase the chances of a swing down on the daily chart. The targets for the bears are the higher lows in the bull trend. The 1st one is the March 24 higher low around 1.1140.
The bulls need a strong breakout above this 8 day trading range. However, the EUR/USD had tried any times on the 60-minute chart and it keeps finding sellers above the prior high. Usually when a market repeatedly tries to do something and fails, it then tries the opposite. Three strong bull breakout attempts that fail is usually enough, and that is why I am calling the pattern a wedge top, even though it does not have a wedge shape. Most wedges do not look like wedges, but computers trade them like wedges. They are all variations of the same process.
I said that the 60-minute chart had a bear breakout over the last hour. This will be just another probe down in the bull channel unless there is strong follow-through. Markets have inertia. They tend to continue to do what they have been doing. Until there is a bear breakout below the April 6 higher low, there is no breakout and the odds favor more sideways trading. However, because there was a wedge top reversal in Europe, day traders are prepared to change their style of trading from scalping to swing trading.
The selloff is simply not quite good enough for the bears to swing trade yet. The bulls will continue to look to buy selloffs until there is a much stronger bear breakout. The bears will continue to take quick profits. Day traders will continue to mostly scalp for 10 – 20 pips.
The context is good for the bears, but they need a strong, relentless breakout to make traders believe that the EUR/USD will begin a 200+ pip move down to the April 6 low.