The EUR/USD forex market on the daily chart closed below the bottom of its 8-week trading range. Today is 2 days after the breakout and it is the follow-through day. It is therefore important. A 2nd consecutive bear bar closing below the bottom of the range will make it likely that the selloff will fall for about a measured move down. That would be below the June 10 high. That was the breakout point of the strong July rally.
The bears need a bear body today, which means a close below the open. The bigger the bear body and the more it closes on its low, the stronger the follow-through selling. That will increase the chance of the selloff continuing for about a measured move down.
The bulls want the bear breakout to fail. At a minimum, they do not want today to be a bear day closing near its low. They would prefer today to close above its midpoint. If possible, they will try to get today to close on its high and have a big bull body. If they get that, traders will look for a reversal up from a failed breakout.
With the overnight range being small, today will probably not be a big day up or down. The fight today will be over whether there will be a bull or bear body. Unless the bulls get a strong reversal up, traders will expect at least slightly lower prices in October.
Outside Down Candlestick On The Monthly Chart
This month is an outside down month on the monthly chart (not shown). Since there are 4 consecutive bull bars on the monthly chart, the bulls have been strong. They will try to get September to close next Wednesday above the August low, which is the bottom of the 8-week trading range.
On the 60 minute chart, this selloff began with a spike down on September 21. It has been in a bear channel since then. A Spike and Channel bear trend usually evolves into a trading range. The bulls typically get a break above the bear trend line and then a rally up to the start of the bear channel or at least up to a major lower high in the channel.
The bear channel began with Monday’s lower high of 1.1774. With 5 trading days left in September, there is enough time for the EUR/USD to get there by the end of the month.
At the moment, this is likely to happen. Why is that important? Because it is back above the bottom of the 8-week trading range, which means back above the August low.
If September closes above the August low, it would be less bearish going into August. It would increase the chance that the selloff is just a pullback from the very strong 5-month rally instead of the start of a bear trend.
Overnight EUR/USD Forex Trading
The EUR/USD forex market is continuing down in its 3-day bear channel. There is no sign of a reversal. Day traders are continuing to sell rallies, betting that each will form a lower high and lead to a new low.
The 3-day bear channel on the 5-minute chart has had many bear rallies of 20 – 30 pips. This is big enough for bulls to buy reversals up for 10-pip scalps. However, it is still easier for day traders to make money selling reversals down from those rallies.
The fight today is over the close. Will today close near its low, making lower prices likely tomorrow? Or, will the bulls get a bull body on the daily chart? That will increase the chance that a reversal up to the start of the 3-day bear channel has begun. Until there is a strong reversal up, traders will continue to bet on lower prices.