Yesterday, EUR/USD broke slightly below the Mar. 31/Aug. 9 double bottom, but closed above it and it was a perfect doji bar (close at the open and in the middle of the bar). That is a neutral bar and not a strong buy signal bar, especially after the big bear bar on Tuesday.
The bulls want a reversal up from a failed breakout below the March low and from a wedge with the lows of July 21, Aug. 11, and yesterday. But the breakout below the March low so far is also weak. There was additional selling today, but so far the pair are back in the upper third of the day’s range. If it closes around where it is, today will be a reversal bar with a small body. That would be a second consecutive doji bar, which means more neutrality, despite the bear trend.
Traders are still deciding if the selloff has to test the November low, which is the bottom of the year long trading range, or reverse up.
A weak bear breakout and a weak buy signal creates confusion, which usually results in sideways trading for a day or two. Less likely since today could be a big trend day in either direction.
The bears want strong follow-through selling, which would make a test of the November low likely. That is unlikely with today reversing up after an initial selloff.
The bulls want a strong reversal up, which would make a test of the Aug. 13 lower high likely within a week or so.
With yesterday being a doji bar and today so far being a second doji bar, a big bull will probably not form. The fight today could be over the close of the day. If there is a bull body, the bigger the body, the more likely EUR/USD will trade higher tomorrow. The bears want a bear body and the close to be below the midpoint. That would increase the chance of at least slightly lower prices tomorrow.