The EUR/USD daily Forex chart is forming a micro double top with Friday’s high. The bears need a strong reversal down over the next few days. Otherwise, a bull flag and another leg up are more likely.
The EUR/USD daily Forex chart broke strongly above a wedge top last week. In addition, the daily and weekly charts are in bull trends. The odds therefore favor higher prices after a pullback.
There is a 6 bar bull micro channel on the daily chart. That means that every low has been above the low of the prior day for 6 days. This is a sign of strong bulls. Usually, they will buy the 1st time the market falls below the prior day’s low. Therefore, if today falls below yesterday’s low, the selloff will probably not get very far nor last more than a couple of days. The odds favor sideways today and tomorrow rather than very far down.
Friday’s vote on a government shutdown is an important catalyst for all financial markets. Therefore, they might start to go sideways before the vote.
Look at every reversal down on the daily chart. The majority began with either a micro double top or a small double top. Similarly, most reversals up from selloffs typically begin with micro double bottoms or small double bottoms.
The daily chart’s overnight reversal down is forming a micro double top with Friday’s high. Furthermore, there is a wedge bear flag on the monthly chart. Consequently, the bears have a 40% chance of a reversal down beginning within the next week. They need 2 – 3 consecutive big bear trend bars closing on their lows on the daily chart before traders will conclude that the trend has changed to down. Until then, any reversal will more likely be a bull flag. This means the bull trend is likely to continue for at least one more leg up.
Overnight EUR/USD Forex Trading
The 5-minute chart broke to a new 3-year high overnight, but then reversed down 100 pips. As a result, the 60-minute chart formed a higher high major trend reversal. All major reversals have a 40% chance of leading to an opposite trend. Hence, there is a 40% chance of a swing down over the next few weeks on the 60-minute chart.
The selloff on the 5-minute chart lacked consecutive big bear bars. It therefore looks more like a bear leg in a big trading range instead of the start of a bear trend. In addition, the chart has been in a 40-pip trading range for 5 hours. Traders are deciding if the selling will continue to below yesterday’s low.
The momentum down overnight is strong enough for the selloff to fall below yesterday’s low today. If there is no pullback on the daily chart today, it will probably come tomorrow. In either case, the odds are that there will be buyers below yesterday’s low. Therefore, the bear breakout will probably reverse back up within a day or two, and the 3-day trading range will probably continue, at least until Friday’s vote.