Yesterday was a big bear bar on the EUR/USD daily Forex chart and a 1-day pullback. That is a weak buy signal bar, even though it is a High 1 bull flag. In addition there is a double top with the September high. The odds are that there will be sellers above. The daily chart will probably pull back below the November 27 high breakout point over the next 2 – 3 weeks. The bulls will buy the pullback.
Yesterday was a 1-day pullback after a strong 4-day rally. It is therefore a High 1 bull flag. Because it was a bear bar, it is a low probability buy setup. This means that the breakout above will probably not get far. Since the rally is testing the resistance of the September high and the bottom of a 15-year trading range, there is an added reason for a 2 – 3 week pullback.
The daily chart is in a 6-month trading range. That means it usually goes above resistance before beginning a bear leg. In addition, it usually falls below support before rallying again. Traders will begin to sell above yesterday’s high. However, the 3 month rally is strong. In addition, there will probably be buyers between 1.1850 and 1.1900. Since the daily chart is in a bull trend, it is a higher probability trade to buy the pullback than to sell the rally.
Overnight EURUSD Forex
The EUR/USD 5-minute Forex chart rallied 70 pips overnight to above yesterday’s high. This triggered a buy signal on the daily chart after a 1-day pullback. Since the chart is at resistance and yesterday was a bad buy signal bar, the odds are that traders will begin to sell. Bears will look for day trading scalps and possibly a 100 – 150 pip swing down to below support. Bulls will continue to buy for swings and scalps, but they will be quick to take profits. This is because they know that a pullback will likely begin within a few days.