The EUR/USD 240 minute Forex chart is in its 8th day of a weak rally. This is a bear flag. Every new bar increases the probability of a bull breakout and a measured move up. The probability of a bear breakout is still about 55%. Yet, there is a 60% chance that bulls will buy a test of the June low and the trading range will continue.
After the huge June 24 bear day, I said that the odds were that it was an exhaustive breakout and not the start of a new leg down. As a consequence, the probability was that the EUR/USD Forex chart would rally for 1 – 3 weeks. This would create a bear flag. The more bars that the bulls add to the flag, the less likely there will be a successful bear breakout. If the current bear flag grows to around 20 bars, the odds of a bull breakout and measured move up will be about at high as for a bear breakout.
The selloff was strong enough so that there will probably be at least one test down and possibly a push below the June 24 bear low. Because that bear day was the biggest bear bar in more than 20 bars in the bear trend, the odds are bulls will buy bear breakout of the bear flag. This will then create either a double bottom and a reversal up, or a bounce and lead to more bars in the trading range.
The rally on the daily chart is in its 8th day. It lacks consecutive big bull bars and most of the bars overlap. This looks like a bear flag, which I have been talking about for 2 weeks.
European Forex session
While there was a surge up 6 hours ago, the EUR/USD Forex chart has been sideways since. Most of the 5-minute bars in the 8-day bear flag have been within trading ranges. This is what typically happens in a leg within a trading range on the daily chart.
The rally on the 60-minute chart is a broad bull channel. As a result, there is a 70% chance of a bear breakout and then the start of a trading range. There is no sign yet that the channel has ended and the trading range has begun. However, the 5-minute chart continues to spend most of its time within trading ranges. As a result, online day traders are mostly scalping for 10 – 20 pips.