Today so far is a bear inside day. Friday reversed up from a parabolic wedge sell climax over the past 7 bars on the daily chart. I have been saying that the EUR/USD pair has been in a support zone for a few weeks and that it will probably reverse up for at least a few weeks. Most likely, it will form a trading range for at least a couple months, and last week could be the start of the transition from a strong bear trend into a trading range.
The bulls formed a reversal bar on the weekly chart, which was a test of the June 19, 2020 low. That was the 1st pullback from the breakout of the spring triangle and the bottom of the support zone that I have discussed many times over the past several months.
The bears are hoping that this rally will quickly form a bear flag and continue the yearlong bear trend. If today is a bear bar closing below its midpoint, it will be a sell signal bar for a lower high double top with the Nov. 18 high. Friday would be a bear trap.
Because last week reversed up strongly on Friday from a failed breakout below a bear channel on the daily and weekly charts, traders should expect at least a couple legs sideways to up on the daily chart. If those legs are strong, there could be a rally back to the Oct. 28 high. If the reversal is more sideways, there could be a new low. However, with the chart in a 7-year treading range, traders still expect a couple month's of sideways to up trading to begin soon.
However, there is only a 30% chance that this selloff will break strongly below the 7-year trading range.
