After a parabolic wedge top and double top, the EUR/USD daily chart sold off to the bottom of a 10-day trading range. It is now in breakout mode, but the parabolic wedge top makes a downside breakout more likely.
The EUR/USD daily Forex chart rallied strongly for 3 months. After forming a parabolic wedge top and a small double top, it sold off for 4 days. Yet, the selloff has been weak and it is so far just a bear leg in a 10-day trading range.
The chart is now in Breakout Mode. The bulls want a strong breakout to a new high. Yet, the parabolic wedge buy climax make a transition into a bigger trading range more likely. Typically, it leads to about 10 bars and 2 legs down. The past 4 days are forming the first leg down, which might add more bars. The bulls will try to resume the bull trend from here, but the odds favor a lower high and a 2nd leg down.
Because of the buy climax at resistance, the odds are that even if the bulls get a new high, it will fail. The bulls need a strong breakout above the high before traders will conclude that the bull trend is resuming.
More likely, the bull trend is transitioning into a trading range that will last 1 – 2 months. Furthermore, it will probably test at least to the bottom of the most recent buy climax. That is the January 18 low below 1.2200.
Overnight EUR/USD Forex
The EUR/USD 5-minute chart has been in a trading range for 10 days. It sold off 70 pips to the bottom of the range overnight. Yet, the selloff lacked consecutive big bear bars. This makes it more likely just a bear leg in the range than the start of a bear breakout. Hence, the bulls will look for a reversal up from the bottom of the range. There is also at the support at the January 17 high, last week’s low, the 1.2300 Big Round Number, and the 20-day EMA.
Even if there is a 100-pip rally over the next few days, a bear breakout is likely within a week. Therefore, traders need to be ready for at least a couple strong bear trend days soon. In the meantime, day traders are either scalping or taking small swings.