Three weeks ago, the weekly chart of the EUR/JPY Forex market had the biggest bear bar in a tight bear channel that lasted more than 20 bars. In fact, the channel lasted more than 50 bars. This bar is more likely an exhaustion gap than a measuring gap. The gap is between its close and the low of the prior bar. The overnight rally closed the gap by going above the June 16 low of 116.49. There is a 60% chance that the rally will eventually reach the top of the sell climax bar before falling for a measured move down.
The selloff also broke below 2 types of bear channels and is reversing up. There is a 75% chance that the rally will reach the top of the two channel.
The sell climax is a Sell Vacuum test of support. The support is the neck line of the double bottom in 2012, and from the measured move down from the 2015 lower high.
On June 24, I mentioned that the EUR/JPY daily chart had a big bear breakout. I said that it was more likely an exhaustive sell climax than a measuring gap. I said that the chart would probably enter a trading range that could last a month or more. This is what is happening.
Because an exhaustion gap is more likely than a successful bear breakout, there is a 60% chance that the EUR/JPY will rally to the June 24 buy climax high before it falls for a measured move down based on the height of that bar. While the bears still might get one more push below the June 24 low before the rally, the odds still favor the rally.
EUR/USD Forex chart
The daily chart of the EUR/USD is unchanged. It is still in a trading range, and most days will be mostly small and sideways. The overnight range was 40 pips, which means that traders are still scalping. While the odds are slightly better for the bulls over the next month, the probability is that most days will be small, trading range days.