The EUR/USD is having its strongest rally in 8 years on the weekly charts. On the daily chart, the rally is extreme. There was a parabolic wedge last week, but this week, the price broke above the wedge.
However, the bear bar on Tuesday might be a 1 day Final Bull Flag. There is also a potential higher high double top with the September 2018 high. Also, this is the 3rd leg up from the March low so there is a big wedge bull channel.
Because the rally is extreme and climactic, the bulls should take profits soon for a couple weeks. That should result in a couple legs small sideways to down for about 200 pips to near the EMA. The minor reversal down might even test the March high.
It is important to note that traders now see the daily and weekly charts as in bull trends. They will buy the pullback. The selloff should become a bull flag and not a bear trend.
5-Minute Chart
The 5 minute chart of the EUR/USD rallied to another 52 week high last night, but reversed all of the way back down to the open and to yesterday’s close. Today so far is a reversal day. That is a sign that the bulls are beginning to take profits and the bears are starting to sell.
Yesterday reversed Wednesday’s rally, but traders bought the reversal and yesterday closed on its high. Will they do that again today? It is more likely that the bulls will not buy aggressively now that there is a 2nd reversal attempt in a market that is likely on the verge of pulling back. Day traders today looking to buy will be scalping.
Will the bears continue the overnight bear trend? There is no need. As long as today closes around the open, today will be a reversal bar on the daily chart. Since traders expect a profit taking pullback to begin within the next few days, this is all that the bears need. They would like today to close below the open, but they do not need a big bear day. Besides, the bulls probably will not allow it.
Traders believe that today isn’t going up or down much. It will therefore probably be a trading range. It could be the start of a 2-week profit taking pullback.