The EUR/USD forex market on the daily chart reversed up from below the bottom of the 7-week tight trading range this week and then above the top. This is a strong reversal. Traders will buy the 1st 1–3 day pullback, confident that there will be at least a small 2nd leg up.
The momentum up this week has been enough to make a test of the September high likely within a couple weeks. That is the top of the wedge on the weekly chart and the top of the 4-month trading range. If the bulls can get a couple closes above that high, traders will expect the rally to continue to the next resistance. That is the February 2018 high at around 1.25.
Since the EUR/USD is still in a 4-month trading range, there is still a 50% chance that this rally will fail around the September high. The odds will go up if the rally starts to stall next week.
Overnight EUR/USD Forex Trading
The 5-minute chart of the EUR/USD Forex market rallied strongly overnight to above last week’s high, and the high of the 7-week trading range. It barely broke above and then has been sideways for a couple hours. That is a sign that it might enter a trading range around last week’s high for the remainder of the day.
While day traders have only been buying, there was a 20-pip pullback about an hour ago. That is enough for some day traders to begin to sell reversals down for scalps, betting on a transition to a trading range for the remainder of the day.
Last week’s high will probably be a magnet for the rest of the day. The bulls want the week to close above last week’s high. That would increase the chance of higher prices next week.
The bears want today to reverse down. But they would need the week to close at least 20 pips below last week’s high to significantly increase the chance that the EUR/USD will stay in the 7-week range.
Day traders will continue to buy pullbacks today unless there is a strong reversal down. Since the EUR/USD will probably enter a trading range around last week’s high, the bulls will switch to scalping.