The EUR/USD daily Forex chart has a double top and is now attempting to form a double bottom. It is therefore in Breakout Mode.
Since it is in a yearlong bear channel, the odds continue to favor lower highs and lows. But, the rally from the April low lasted only 4 days. Because that is less than prior rallies, there is a slightly higher chance of a test of the April high before a new low. However, the odds are very close to 50-50. The chart could not be in a Breakout Mode pattern unless the bulls and bears were closely balanced.
When a chart is in Breakout Mode, there is a 50% chance that the 1st breakout up or down will reverse within a couple of days. Once there is a successful breakout up or down, traders will look for a measured move based on the 100 pip height of the trading range.
Today is so far small. There is no evidence that the breakout will come today. The bulls are trying to create a credible buy signal bar to complete the double bottom.
Since the bears had an outside down day yesterday, they would like a bear body today. That would increase the chance of at least slightly lower prices on Monday.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart has been in a 30 pip range overnight. The open of the day is important today. This is because a close above the open will turn today into a bull buy signal bar for Monday. That would increase the chance of higher prices next week.
The bears want a bear body. They, therefore, will sell rallies and try to get the day to close below the open. That bear body would turn today into a good follow-through bar on the daily chart after yesterday’s outside down day. It would, therefore, increase the chance of lower prices next week.
With today’s range and the bars on the 5-minute chart being small, today will probably remain a small trading range day. Day traders will continue to scalp for 10 pips, unless there is a strong breakout up or down. The bulls will buy reversals up from below the open and the bears will sell reversals down from above the open.