Thirty minutes before the NYSE's open, and the 60-minute chart on EUR/USD had continued down its broad bear channel of the past week. But the pullback is still above the bottom of the bull leg that began on August 19. The bulls see a bear channel as a bear flag and correctly expect an upside breakout from the channel.
However, there is no bottom yet.
The 5-minute chart had a big bear breakout. When the biggest bear bar occurs late in a bear trend and is more likely an exhaustion gap than a measuring gap. This means that the downside will probably be limited over the next few hours. There is often a small 2nd leg down that last for about 5 bars before the pullback begins. Although this can be a measuring gap and the start of a new strong leg down, the odds are only about 30%.
An exhaustion gap is more likely to lead to a trading range than a bull trend, and therefore those trading Forex markets for a living will be looking to buy low, sell high, and scalp for the next hour or so. If instead there is strong follow-through selling or a strong reversal, they will swing trade, but neither is as likely as a trading range.
The 60-minute chart of the USD/CAD is still in a broad bull channel and it is turning up from a higher low. However, the channel over the past few days is also a trading range, and day traders are trading it like a trading range. The rally of the past hour is not very strong and it is more likely a bull leg in a trading range and the resumption of the bull trend. The bulls nee the rally to break above the overnight lower high of 1.3294 for traders to think that the bulls have regained control.
Even if the bulls succeed, they will need follow-through. Otherwise, the bears will assume that the rally is just a 60 minute lower high and possibly a lower high major trend reversal.