The EUR/USD daily Forex chart is in the middle of a 3 month trading range. There is no reliable evidence that it is about to break out.
The EUR/USD daily Forex chart has a 3 month trading range after a year long rally. The bulls hope that last week’s 2 day selloff is a pullback in a rally to the top of the range. On the other hand, the bears see last week’s rally as a pullback from a breakout below the range. Both are correct. Traders need to see sustained momentum up or down before betting on which side will win.
Legs in trading ranges usually subdivide into 2 or 3 legs. Therefore, the bulls are trying to start a 2nd leg up from Friday’s low. Yet, the 2 day rally might be all that they get. Until there are 3 – 4 average size consecutive trend days or 2 big trend days, there is not enough momentum in a leg to make additional days in the leg likely.
The weekly chart is in a bull trend. Furthermore, the chart has been sideways for 8 weeks. While it is becoming increasingly neutral, the odds continue to favor a bull breakout. A pullback usually has to grow to 20 or more bars before the bears have about the same probability as the bulls. At that point, I use the term trading range instead of pullback in a bull trend or bull flag
Overnight EUR/USD Forex trading
The EUR/USD 5 minute chart has rallied 100 pips up from Friday’s low. The bulls hope that it will break above the 2 day bull channel and test last week’s high.
Yet, until there is a breakout, there is no breakout. Traders will be unwilling to hold onto positions. Instead, they will continue to take quick profits. This is because they will bet that any reversal will soon fail and reverse again. Traders need a strong breakout up or down before they will swing trade.
As I am writing, the bulls are trying to get a strong breakout on the 5 minute chart. However, if there is no follow-through buying, they will take profits and the bears will bet on another failed breakout.