After breaking strongly below a 3 month double bottom, the EUR/USD daily Forex chart reversed up. The 3 day rally is a bear flag. Because it currently has a 2nd consecutive doji bar, it is a weak sell setup.
The EUR/USD daily Forex chart had a big bear bar on Monday that closed far below the August/October double bottom. But, Tuesday reversed up strongly. In addition, there is a wedge bottom on both the daily and weekly charts.
While the bulls want a reversal up, the 2 month bear channel on the weekly chart is tight. In addition, the 3 day selloff was strong. Consequently, the bulls will need to go sideways for at least a few weeks before they can create a major reversal setup on the daily chart.
Furthermore, the 3 big bear days will require a micro double bottom before they can get even a minor reversal up. Therefore, the upside over the next couple of weeks is probably just 200 pips in what will probably be mostly a trading range.
The 3 day rally is a bear flag. But, yesterday was a bull doji bar. So far, today is a doji bar as well. That represents a small tight trading range, which is a limit order market. As a result, if today remains a doji bar, there probably will be more buyers than sellers below its low. This means that the daily chart will probably be sideways for at least a couple more days.
The bulls want the week to close above the 1.1323 open of the week. They would then have a bull reversal bar on the weekly chart. But, since the 8 week selloff has only had one small bull bar, a reversal up next week would probably stall after 1 – 2 weeks.
In any case, the week’s open will be an important price for today and tomorrow. Therefore, the next 2 days will probably be mostly sideways around the week’s open.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute chart rallied above yesterday’s high and the open of the week over night. It sold off 80 pips and then reversed up 50 pips. This is trading range price action around the key price of the 1.1323 open of the week. Traders will probably buy reversals up from 30 – 50 pips below and sell reversals down from 30 – 50 pips above until tomorrow’s close. This will create a scalper’s market.
Less likely, there will be a strong trend up or down and the week will close near its high or low. Unless there is a series of strong trend bars, day traders will be scalping.