The EUR/USD daily Forex chart triggered a buy signal today by going above yesterday’s high. There is a double bottom higher low major trend reversal. However, the chart is still in a trading range and therefore neutral.
The EUR/USD daily Forex chart has been in a tight trading range for 8 weeks. It therefore has both buy and sell signals. Yesterday was a good buy signal bar for a double bottom higher low major trend reversal. This is a credible buy setup. However, the probability of a swing up is only 40%. Traders wanting higher probability will wait for a strong breakout above the December 12 lower high of 1.1444.
The bears want this breakout to reverse, like all of the other breakouts up and down for the past 2 months. They then want a breakout below the double bottom and then the November low.
Tomorrow’s FOMC announcement is a potential catalyst for a big move up or down. Furthermore, currencies sometimes begin moves around the 1st of the year that last for months. Consequently, traders should be ready to switch from trading range trading to trend trading within the next few weeks.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart rallied 70 pips overnight in a tight bull channel. It broke above yesterday’s high and triggered a buy signal on the daily chart.
However, it then sold off 30 pips in a tight bear channel. That creates a Big Up, Big Down move, which means Big Confusion. A strong minor reversal usually leads to a trading range. The odds are that there will be a test of the overnight high today.
But, the bars are small and most overlap several other bars. This is not how a strong breakout typically looks. Therefore, while the daily chart triggered a buy signal, the 5 minute chart will probably be in a range today. Traders might be waiting for tomorrow’s FOMC announcement.