Weak rally on 60-minute EUR/USD chart up from measured move targets.
The correction down from the wedge top on the daily and weekly charts continued yesterday, but it has lost momentum. The odds were that it would test the April 29 buy climax low of 1.1344. It got to within 14 pips yesterday and reversed up overnight. The reversal up so far is still within the tight trading range of the past 4 days, and it could break to the downside by Friday’s close.
It could then fall much further and form a big bear entry bar on the weekly chart after last week’s strong sell signal bar and wedge top. However, the bears so far have been unable to drive the EUR/USD Forex market down far and fast. This increases the chances of a bounce over the next few days. There is no bottom yet on any time frame, and without a clear bottom or a strong bull breakout, this bear channel can continue down a long ways. It is more likely to bounce this week because the selling has not been strong. That makes this bear swing more likely a bear leg in a trading range and less likely the start of a bear trend.
Just like the April 29 buy climax low on the daily chart was a target for the bears, the May 5 sell climax high of 1.1493 is a target for the bulls. Remember, the selling over the past week was strong enough to create a Big Up, Big Down pattern. That is usually followed by a trading range, which means a rally. Once the rally comes, the bears will see a lower high major trend reversal and expect a 2nd leg down from the wedge top on the daily and weekly charts.
The bulls will see the selloff as just a pullback in a broad bull channel on the daily chart. They expect it to be followed by a another new high, as was the case after every other pullback in the channel. The Big Up, Big Down pattern created confusion. Confusion is a hallmark of a trading range. That makes a trading range for at least a week likely on the daily chart.
The 50-pip overnight rally was good for the bulls because it broke above the 3-day tight bear channel. The problem for the bulls is that the 60-minute chart lacked big consecutive bull trend bars, and the rally only covered 50 pips. Just like the selloff was not strong, the rally also was not strong. The result most likely will be a trading range for a day or two.
Both the bulls and bears need a strong breakout. Neither is getting what it wants. This means that the US sessions have had small ranges and traders have been limited to 10-pip scalps. Until there is a strong rally or selloff, that is the only choice for online day traders.