- EUR/USD bears have had a strong selloff over the past week, testing the 1.000 big round number and the July 14 low.
- Yesterday closed below the July 14 low and was a big bear bar closing near its low. While this is good for the bears, the problem with yesterday’s bar is that it is climactic and may lead to sideways trading over the next few trading days.
- Take a look at August 15th; while it was not as climactic as yesterday’s bar, it was still a sell climax that led to two days of sideways trading. This makes me think today and tomorrow will disappoint the bears.
- So far, the bears are doing a good job of showing signs of strength. The bears hope that this is a strong enough bear breakout below the July 14 neckline to lead to a measured move down. While this is possible, it is not likely.
- At the moment, the selling pressure is good for the bears, and the first reversal will likely fail. This means that while the market is at support, the bulls probably do not want to buy here unless the market can form some micro double bottom first.
- While the odds eventually favor the market getting back to the middle of the June – July trading range, this selloff down to the July 14 low is a problem for the bulls. The selloff is stronger than what traders expected and increases the odds of being more sideways.
- The first reversal is likely minor, so the best the bulls can hope for is sideways until they can develop more selling pressure.
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