The daily chart of the EUR/USD Forex market is in the middle of a 4 month trading range. That means that the bulls and bears are balanced. Furthermore, a trading range always has both a reasonable buy and sell setup. The bulls want the higher low major trend reversal to lead to a 2nd leg up from the October 1 wedge bottom.
However, the weekly chart has been in a bear channel for 2 years. The bears have sold every 2 – 4 week rally. They see this 3 day rally as forming a double top bear flag with the micro double top of November 6 and 7. They want a break below the October low and another new low in the 2 year bear channel.
Trading ranges constantly disappoint bulls and bears. Every move up or down is more likely to reverse than to begin a trend. Consequently, this 3 day rally might test down to the November 14 low before reaching the October high.
Even though the weekly chart is in a clear bear trend, the daily chart is in a trading range. Traders continue to sell rallies, buy selloffs, and take profits every week or two.
Overnight EUR/USD Trading
The 5 minute chart of the EUR/USD Forex market has been in a 20 pip range overnight. Traders are deciding whether the 3-day rally will continue up to the October 31 high or reverse down to the November 14 low.
Yesterday’s high and the November 6 and 7 highs are important resistance. Unless the bulls get a breakout above those highs today or tomorrow, they will exit. Traders would then expect a test of the November 14 low.
The lack of momentum overnight is a sign that traders will probably need another day to decide. Consequently, day traders will continue their overnight scalping today unless there is a surprisingly strong breakout up or down today.