The EUR/USD daily Forex chart has been in a trading range for 2 months. It has gone sideways for 3 days and is near the bottom of the range.
The EUR/USD daily Forex chart traded down for 5 days to a higher low in a 2-month trading range. The bars have not been big and yesterday had a bull body. It has been sideways for 3 days. The bears want this pause to be a bear flag. They then want a breakout below the flag and below the bottom of the 2-month range. However, there is not much momentum. In addition, trading ranges resist breaking out. Consequently, if the bears get a break below the 3-day bear flag, it will probably fail.
The bulls see the 3 sideways days as an attempt to form a micro double bottom. While they ultimately want a break above 1.25 and the top of the range, there is no indication yet that they are ready to buy aggressively all off the way to the top of the range and then above. More likely, they will get a bounce back up to the middle of the 300 pip tall range over the next few days. This is true even if the bears get a 1 – 2 day breakout below the 3 day consolidation first.
Until there is a strong breakout far above or below the range, the odds are that every 5 – 10 day swing up or down will reverse.
Overnight EUR/USD Forex Trading
The EUR/USD 5-minute chart traded sideways in a 40-pip range overnight This broke above the 4-day tight bear channel. The bulls want a major trend reversal up. Yet, even if they get it, the rally will probably stall about 100 pips above, which is the middle of the 2-month range. Since the 4-day channel was tight, the bears were strong. Therefore the bulls will probably need more sideways trading before they can generate enough buying pressure for the 2- 5 day rally.
The bears want the bull bottom attempt to fail. They want a double top bear flag and a resumption of the bear trend. The momentum down over the past week favors a bear breakout. However, since the 5 day selloff is near the bottom of a 2-month trading range, the odds are that a bear breakout on the 5-minute chart will probably be about 100 pips before a reversal up.
Since the 3-day range has been tight, day traders have been mostly scalping. The bulls are looking to buy reversals up from the bottom of the 3-day range. The bears are looking to sell reversals down. The breakouts have been small and brief. Most day traders will not swing part of their trades until there is a strong breakout up or down.