The EUR/USD daily Forex chart dip less than a pip below the March 1 low overnight. The bulls see this as a double bottom. Furthermore, today is a micro double bottom with the bull bar from 2 days ago. The bears want the selloff from the head and shoulders top to continue.
The EUR/USD daily Forex chart is in a trading range and therefore has both buy and sell setups. Most breakout attempts fail. Hence, the head and shoulders top has less than a 40% chance of continuing for a measured move down.
The bulls have a double bottom bull flag. While they want a rally that breaks above the top of the range, it is more likely that they will get a leg up in the range that lasts a week or two, like all of the other legs over the past 4 months.
If the bears get 2 big bear bars closing below the range, traders will look for a 400 pip measured move down. More likely, if the current selloff continues, it will reverse up from just below the breakout point on the daily chart. That is the double top at the September 8 and January 4 highs at 1.2088.
The next week will be interesting. The odds favor a bounce. The bulls want a 150 pip rally that retraces at least half of the 2 week selloff. But, if the chart enters a tight trading range, the bears will see a bear flag.
Since the breakout point is only 60 pips below, the odds will favor a bear breakout down to 1.2050 – 1.2090 within 2 weeks. That is important support. The chart is now close enough so that it will probably be unable to escape its gravitational pull. Once there, a reversal up is more likely than a bear trend.
20 Gap Bar buy setup on weekly chart
One final point. This is the 1st pullback to the 20 week EMA in more than 20 weeks. Therefore, there will probably be buyers here for a 20 Gap Bar buy setup. The last pullback was in November. The bulls formed a 3 week micro double bottom that led to a 1,000 pip rally.
Since there is a bear trend line above the January high, the odds still favor a rally to that resistance. That would require about a 500 pip rally over the next few months.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart reversed up 50 pips over the past few minutes. The odds are it will form a bull trend day today. Today will therefore be a micro double bottom with Tuesday, and a double bottom with March 1. It would be a buy signal bar for tomorrow.
Less likely, the rally will reverse and the day will close on its low. Because the reversal up was strong and the context is good for the bulls, the best the bears will probably get today is a trading range.