The EUR/USD forex market on the daily chart is breaking out strongly above its 4-month trading range. Yesterday was the 2nd consecutive bull day with a big body and closing near its high and above the trading range. That was enough for traders to conclude that the breakout will continue higher and have at least 2 legs up.
A pullback can begin at any time. The bulls will start to take some profits soon. If the profit-taking lasts more than a day, there will be a pullback.
But traders will buy the pullback. The bulls who missed the move are eager to get long. The bears who are short are desperate to get out with a smaller loss.
With both the bulls and bears wanting to buy, the 1st pullback should be brief. Traders will not expect more than a 3-day pullback until after there has been a 2nd leg up to resistance.
The nearest resistance comes from 2 measured move targets. The nearer one is at 1.2206, which is based on the breakout above the small wedge from Nov. 23 to Nov. 30. The higher one is 1.2236, which is based on the breakout above the double top of Oct. 21 and Nov. 9. There are other higher targets as well. The most important is the February 2018 high of 1.2555.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market went sideways and then up overnight. Even though today is currently a big bull bar on the daily chart, there is an expanding triangle on the 5-minute chart. That means that the bulls are starting to take some profits. It increases the chance of more sustained profit taking coming within a few days.
Therefore, the bears should soon get a swing down on the 5-minute chart. But, as I said, even if the selloff is strong on the 5-minute chart, traders will buy the 1st 1 to 3-day pullback on the daily chart.
Because of the overnight trading range, day traders will be willing to sell for scalps today. The rally over the past 3 hours has been strong. Most daytraders will not sell until the chart starts to go sideways again. And even then, they will only scalp unless there is a strong reversal down.
With the daily and weekly charts being strongly bullish, most day traders will focus on buying pullbacks than on selling rallies.