The EUR/USD forex market on the daily chart broke below the 8-week trading range 2 days ago. Yesterday was the follow-through bar. It was a 2nd consecutive close below the trading range, which increases the chance of a measured move down to below the June 10 high. That high is the breakout point and therefore a magnet below.
But yesterday had a bull body. Even though it was tiny, it was a sign of hesitation. It reduces the chance that the selloff will be a trend reversal instead of just a deep pullback in a strong bull trend.
Today so far is a bear bar on the daily chart and it is testing yesterday’s low. The bears want today to close below yesterday’s low and at the low of the week. But if the bulls get a reversal up today, there would be a micro double bottom on the daily chart. That would increase the chance of a 1–3-day bounce next week.
It is unlikely that the selloff will go straight down to below the June 10 high. There will probably be attempts to reverse the trend back up. But unless the bulls get some big bull bars and a couple consecutive closes back above the August 3 bottom of the range, traders will sell rallies, expecting lower prices.
Today is Friday and therefore the appearance of the bar on the weekly chart is important. At the moment, this week (not shown) is a big bear bar closing on its low and far below the 8-week tight trading range. If it remains this way, it will increase the chance of lower prices next week.
Overnight EUR/USD Forex Trading
The 5 minute chart of the EUR/USD Forex market reversed down from 2 pips below yesterday’s high overnight. The low so far is just above yesterday’s low. Today is so far an inside bar on the daily chart.
The bears want today to stay at the low of the session. This week would then be a big bear bar on the weekly chart with a close near its low. Traders would expect follow-through selling next week.
The bulls want a reversal back up to the high of the day. Today would then be a micro double bottom with yesterday on the daily chart, which would increase the chance of a bounce next week.
The overnight selloff has been in a tight bear channel so day traders have only been selling. However, the selling is stalling at yesterday’s low. If the bulls can get a 20–30 pip bounce, day traders will begin to buy. They would expect either a trading range or a bull trend reversal.
For the bulls to get a reversal up, they will probably need the selloff to transition into a trading range for at least an hour. Usually a bear trend needs to go sideways and form at least a small double bottom before it can reverse into a bull trend.