The 60 minute EUR/USD forex chart is in a tight trading range after Friday’s sell climax. There is a 50% chance of a breakout and measured move up or down over the next few days.
The daily chart of the EUR/USD had its biggest bear day in months on Friday. It came after a swing down that lasted more than 20 bars. Hence, it is more likely an exhaustion bar than a breakout that will lead to a measured move down. The breakout was strong enough so that the odds favor at least a small 2nd leg down.
However, because of the sell climax, there is at least a 50% chance that the selloff will be brief. There might be enough bulls and bears buying that 2nd leg down to reverse the EUR/USD back up. If so, the 1st target is a close above the breakout point. That was the June 1 low of 1.1130. If the bulls succeed, their next target is the moving average and then the top of Friday’s sell climax. That is 600 pips above. If the bulls do succeed, they will probably need more than a month to reach their target.
I believe that because the sell climax candlestick pattern in the USD/JPY is most likely exhaustive, the other Forex markets are as well. This means that there is a 60% chance of a 500 pip or more rally in all of them over the next two months. However, there might be one more brief leg down 1st.
The bears know that the selling was climactic. Hence, they expect a rally or trading range for a week or two. At that point, they will assess the strength of the bulls. If the rally is weak, the bears will again sell and therefore create trend resumption down. If they are uncertain, the trading range of the past 6 months will continue indefinitely.