The EUR/USD daily Forex chart has been sideways for 4 days. This is both a micro double top bear flag and a micro double bottom higher low.
The EUR/USD daily Forex chart is near the bottom of a 2 month trading range. The momentum down over the past 2 weeks has not been strong. This selloff is more likely just a bear leg in the trading range. Because there is a 4 day double top bear flag, the bears might get a 1 – 3 day small leg down to the bottom of the range this week. Yet, the odds are that the breakout attempt will fail. Trading ranges resist breaking out. It is therefore more likely that the daily chart will begin a 150 pip bounce from the 3 day micro double bottom, or after a brief break below the 4 day bear flag.
Sell signal on the weekly chart
Since last week was a bear inside bar on the weekly chart, it is a sell signal bar. In addition, it is a 2nd entry sell on the failed break above 1.25. The odds are that this week will trade below last week’s low and trigger the sell signal. However, since the momentum up on the weekly chart is strong, the odds favor a continuation of the 6 week tight trading range. This means that the sell signal will probably fail to lead to a reversal down. Instead, the 6 week range will continue.
If the bears get a big bear bar this week and a follow-through bear bar next week, traders will conclude that the double top is in control. They then will look for a 300 pip measured move down to around the January 9 low.
Overnight EUR/USD Forex trading
The 100 pip tall 4 day trading range on the EUR/USD 5 minute Forex chart will probably break out this week. The breakout can be up or down. If there is a down side breakout, it will probably fail within a few days. This is true even if it falls below the February 9 neck line of the 2 month double top. Therefore, the bears will take quick profits unless there is a strong break below that neck line. They will not trust the bear breakout unless it is big and has follow-through bear bars on the daily chart.
The bulls know that a break above the top of the 2 month trading range is unlikely over the next couple of week’s as well. They therefore will take profits above the midpoint of the range, around 1.2450.