The EUR/USD daily Forex chart is in a 4 week trading range. That range is in the middle of a 6 month trading range. There is currently a double bottom, but last week’s selloff was strong. Therefore the bulls will need a micro double bottom. Alternatively, a reversal up from below the October 9 low would create a 2 month wedge higher low major trend reversal.
The EUR/USD daily Forex chart has been selling off for the past month. But, the reversal up from the failed August bear breakout was strong. In addition, both the weekly and monthly charts are slightly bullish. As a result, the current selloff will probably reverse up from above the August 15 low.
If Friday’s reversal up is successful, the bulls will have a double bottom higher low major trend reversal. The bears only have a 40% chance of a break below the August 15 low before there is a break above the September high. However, they have a 50% chance of a breakout below the October 9 low. If they get that, but there is then a reversal up, the bulls will have a wedge higher low major trend reversal.
Today so far is a Low 1 bear flag. If today closes near its low, today will be a stronger sell signal bar. That would increase the chance of a selloff to 1.14 this week. Alternatively, if today has a big tail below, the daily chart will probably go sideways for at least a couple more days before deciding whether to test 1.14 or reverse up from the double bottom with the October 9 low.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart sold off 70 pips in a tight bear channel overnight. Over the past 3 hours, the bars have been getting bigger, overlapping more, and forming big tails. These are signs of more two-sided trading. They reduce the likelihood of much lower prices today. Therefore, the bears will switch to selling rallies and scalping.
In addition, they increase the probability that the overnight bear trend will transition into a trading range. Because the bear trend has been in a tight bear channel, the bulls will only scalp. They know the odds of a big reversal up are small without at least 2 – 3 hours of sideways trading first.
With both bulls and bears scalping, the chart should turn into a 30 – 50 pip tall trading range today.