The EUR/USD daily Forex chart had a big bear bar yesterday. It was therefore another sell climax in a series of sell climaxes. Since the selloff is near support, it will transition into a trading range over the next month.
The EUR/USD daily Forex chart has fallen in a series of sell climaxes over the past month. The bars are starting to form tails at their bottoms. Furthermore, the bulls have been making money buying at and below prior lows over the past 2 weeks. These are early signs of a sell climax transitioning into a trading range.
While the selloff might continue down to the November 7 low before having its 1st 2 week rally, that rally can come at any time. Therefore, the bears will switch to selling rallies and taking profits at new lows. In addition, the bulls will begin buying below recent bars and holding for 50 – 100 pip bounces.
Since the bear channel is tight, the 1st rally will be minor. Yet, it will probably last about 10 bars and have at least 2 legs. In addition, it will probably get close to the 20 day EMA. This means that it will be at least 150 pips tall.
After that 1st strong minor reversal, the bears will return. While they might get a test down to around 1.1500 and the November 7 low, there is a 60% chance that the daily chart will be in a 300 pip tall trading range for the next 2 months.
Overnight EUR/USD Forex trading
Yesterday’s bear trend was big and it was late in a bear trend on the daily chart. It is therefore likely exhaustive. Exhaustion usually leads to a at least a small trading range. Therefore, today will probably be a trading range day.
The 5 minute chart has been in a 50 pip tall range overnight. The downside risk is small today, and the bulls will buy below prior lows. While today could be a big bull trend day, it is already a bull trend. It will probably not get much bigger. Day traders will therefore be scalping today.