The EUR/USD daily Forex chart is starting a 2nd leg up after reversing up from a double bottom. Since it is in a 3 month trading range, rallies and selloffs are likely to reverse. This rally will probably go above last week’s lower high. If it reverses from above that high, the bears will see a wedge rally that is also a right shoulder of a head and shoulders top.
The EUR/USD weekly Forex chart has been sideways for 3 months. It go close to its 20 week exponential moving average so that it probably cannot escape the gravitational pull of that support. As a result, the 2 week rally will probably stall within a couple of weeks and the weekly chart will then go sideways to down to the average. Since the weekly bull trend is strong, the bulls will buy at that support.
This is true even though falling to the average would trigger a sell signal on the daily chart by breaking below a head and shoulders top. A major top only has a 40% chance of leading to a reversal, and that is consistent with the weekly bulls buying the selloff.
Overnight EUR/USD Forex trading
The 5 minute chart continued its 2 day rally by trending up 70 pips over the past 5 hours. However, the rally lacked consecutive big bull trend bars. It is therefore likely a bull leg in the 3 week trading range. The odds are that it will reverse down once it get to around or just above last week’s high.
The 3 week trading range would then be a wedge top. It is within a 3 month head and shoulders top. The odds are that both trading ranges will continue for at least another 2 – 4 weeks. Consequently, day traders will look for 2 – 4 day moves up and down