The EUR/USD daily Forex chart reversed up overnight after falling a fraction of a pip below the December 12 low. That was the start of a parabolic rally and it is therefore a major higher low. The daily chart is transitioning into a trading range with this double bottom.
The EUR/USD daily Forex chart is forming a double bottom with the December 12 major higher low. This follows consecutive sell climaxes, which typically evolve into a trading range. While the bottom of the range will probably be below the overnight low, it will probably not be much below.
The 1st target for the top of the range is the top of the most recent sell climax. That is the May 14 lower high at 1.1998. Therefore, the trading range will be about 300 pips tall. Furthermore, trading ranges in the EUR/USD Forex market usually last 1 – 2 months. That will probably be the case here.
When a market is in a trading range, uncertainty grows. Traders are never confident of turning points. Nothing looks as clear as it does in trends. They therefore are unwilling to hold onto positions for more than a week or so. The result is many reversals and then a clear range.
It is always possible for this selloff to continue much lower before entering a range. However, parabolic sell climaxes usually transition into a range. In addition, the selloff is bouncing at the support of the 1.17 Big Round Number and a previous major higher low. The odds are that the evolution into a range has begun.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart reversed up overnight after dipping less than a pip below the December 12 major high low. While the rally has only been 45 pips, it is coming from major support. Also, the daily chart has a series of sell climaxes, which is an exhaustion pattern. Therefore, the bulls will be more willing to use wider stops, scale in, and hold onto part of their position for 50 – 100 pip bounces over the next few weeks.
Since the overnight range was only 60 pips and the reversal was not particularly strong, day traders will scalp for 10 – 20 pips today. However, this is a reversal in an oversold market at major support. That increases the chance of a sharp rally during one or more days this week. If there is a strong bull breakout, day traders will scalp for 30 – 50 pips.