The EUR/USD daily Forex chart formed an outside down bar yesterday. There is now a double top, a 4-day micro double top, and a wedge rally in a yearlong bear channel. Yesterday is therefore a sell signal bar for today.
But last week’s consecutive outside bar buy signal is more important. Consequently, the selloff over the next few days will probably be minor. This means that a bull flag is more likely than a breakout to a new low in the bear channel.
The pullback could last a week or more and test the June 6 outside bar low. However, at the moment, the odds still favor at least one more leg up to above yesterday’s high within a couple weeks.
The importance Of 1.1322
The most important price through tomorrow is the 1.1322 open of the week. If the bulls get the week to close above it, this week will have a bull body on the weekly chart. It would therefore confirm last week’s bull breakout on the weekly chart. That would increase the chance of higher prices over the next couple weeks.
Because it is so important, the bears will keep selling every time there is a rally above it. They want a bear body on the weekly chart. Traders would then suspect that last week’s bull breakout above the 20-week EMA and bear channel will fail.
The bulls will keep buying below, trying to stay near this week’s open. Then, tomorrow, they will try hard to get the week to close at or above this week’s open.
Overnight EUR/USD Trading
Even though yesterday is a sell signal bar on the daily chart, today so far has not traded below its low. Therefore the bears have been unable to trigger the sell signal.
Even if they succeed during the US session today, the small overnight range represents a lack of enthusiasm. It reduces the chance of a big bear trend today. Day traders have been scalping for 10 pips.
If today’s low remains above yesterday’s low, today will be an inside day on the daily chart. Since yesterday was an outside day, today would be a buy signal bar for an ioi (inside-outside-inside) buy setup.
But after 5 sideways days, there is now a tight trading range. That resists breaking out. The chart might therefore stay sideways into Wednesday’s FOMC meeting.