– EUR/USD went sideways on Thursday and Friday after a big bull day. That rally was from a micro wedge bottom and from just below the bottom of a year-long trading range.
– Also, after five consecutive bear bars on the weekly chart, EUR/USD was oversold.
– Bulls bought below Friday’s low, and yesterday rallied to above Friday’s high. Yesterday was, therefore, an outside up day. That increased the chance of higher prices today.
– That is especially true since I have been saying that there would soon be a reversal up to at least a little above the Aug.19 low (the Aug. 20 low on the weekly chart). That was the breakout point of three years ago, and EUR/USD has been in a trading range for a year. When there is a trading range and nearby support or resistance, the market usually goes through it before reversing.
– Traders are deciding if the rally will continue up to the Sept. 3 high, or form a lower high and then reverse back down to below the March 9, 2020, breakout point.
– It should soon rally for several weeks, and that rally might be under way.
– However that March 9, 2020, high is an important magnet below. Also, the five-day rally is a breakout above a tight bear channel since Sept. 3. The first reversal up is typically minor. That means there is usually a test back down.
– Unless EUR/USD accelerates up strongly over the next few days, it will probably test the Oct. 12 low, and it still could dip at least a little below that March 3, 2020, high at around 1.15.
– Whether this is the start of the three-week rally or if there is one more brief new low, the bulls will try to get back to the Sept. 3 high within a couple months.
– Today rallied from the open and pulled back a little from just above the Aug. 19 low, which was the near-term target.
– If today closes 20 or more pips above that low, it should then continue up to the Sept. 22 lower high.
– More likely, it will stall around the Aug.19 low. Traders will then decide between a test of the Oct.12 low and the Sept. 22 high.