Yesterday was the sixth consecutive bull candlestick for EUR/USD after the reversal up from below the bottom of the year long trading range.
Six consecutive bull bars is sustained buying. It increases the chance that the rally will continue higher before falling much below the October low.
However, since it is unusual, it is climactic. That increases the chance of a test down soon.
It tested above the Aug. 19 low, which is resistance. It might go sideways for a few days while traders decide if the rally will continue or reverse down and test the October low.
Today so far is a bear day. It is also a lower high micro double top with Tuesday’s high.
If today closes near its low, it will be a sell signal bar. There would be a micro double top and a truncated micro wedge over the past 3 days. Truncated means that the third high did not go above the second high in the wedge.
If there is a reversal down, traders would look for a test of the start of the wedge, which was the Oct. 18 low. Below that is the October low, and then possibly the Mar. 9, 2020 high, which was last year’s breakout point.
I have said several times that the downside magnet is the Mar. 9, 2020 high. Furthermore, I said that if the EUR/USD gets there, it will probably not go much lower before reversing up for several weeks.
Because the bear channel from the September high is tight, the current 2-week rally will probably be minor. That means there should be a test back down starting within a week or so.
But if there is a test down, traders will buy around the October low. They expect this reversal up to test the September 3 high, whether or not there is a dip below the Mar. 9, 2020 first.
Traders are probably becoming more interested in buying selloffs than selling rallies.