The EUR/USD daily Forex chart pulled back overnight to below the July 12 high. It therefore closed the gap. The bears need a 3rd consecutive bear day before traders will begin to believe that a reversal has begun. If it has, it will probably lead to a trading range for at least a couple of weeks.
The EUR/USD Forex market broke strongly above the 2nd top of a wedge on the daily chart. That increased the odds of a measured move up. While the bulls will allow the gap above the July high to close by 10 – 20 pips, they do not want a lot of overlap. This is because if the pullback falls 50 or more pips below that high, or if there are 3 consecutive bear days, the odds are that the bears will win.
Since the 6 month channel is tight, a win by the bears will be a pause in the bull trend. Therefore, the best they can probably get over the next several weeks is a trading range, not a bear trend. Yet, if they can create a trading range, they then will try for a major reversal into a bear trend.
Top of 30 month trading range on weekly chart
While a wedge top often leads to a trend reversal, this pattern is too small on the daily chart. However, it is big enough on the 240 minute chart to lead to a bear trend on that chart. But, that would simply be a pullback on the daily chart.
As strong as the rally has been for 6 months, the weekly chart is still in a 30 month trading range. Since most breakouts fail, the odds are that the weekly chart will soon begin to go sideways for many weeks. However, there is still room to the top of the range. Consequently, even if the bears get a 300 – 500 pip pullback, a big trading range is more likely than a bear trend on the weekly chart.
Overnight EUR/USD Forex trading
The 2 day pullback continued overnight. As a result, the selloff dipped below the July 12 high. That was the breakout point and it is therefore support. The odds are that the selloff will end today. But, the selloff has been in a tight bear channel on the 60 minute chart. Therefore, the best the bulls will probably get today is a bounce and a trading range.
Since the 2 day momentum down is strong, bears will sell rallies. Since the EUR/USD market is now at support, the bulls will buy. Because this creates confusion, the result is both will take profits. As a result, this buying low, selling high, and quick profit taking will lead to a trading range.