The EUR/USD daily Forex chart sold off from a wedge bear flag over the past 4 days. There will typically be at least a small 2nd leg down from a wedge. Therefore, traders will sell the 1st 1 – 3 day bounce.
However, the market is near the bottom of its 4 month range so traders expect a reversal up after the 2nd leg down. This would be a higher low major trend reversal setup. But, because the legs in the 4 month range have lasted only 2 – 3 weeks, the best the bulls will probably get is a rally toward the top of the range.
Since the range has lasted much longer than all prior ranges over the past couple of years, it will probably break out on some Brexit news within a month. In the meantime, traders will continue to bet on reversals.
Overnight EUR/USD
The EUR/USD 5-minute Forex chart has been in a 25 pip range overnight. This is so tight that it is difficult even for scalper’s to make money.
It is in the buy zone that I mentioned yesterday. That is around the February 22 low and the 1.13 Big Round Number.
A wedge usually has at least a small 2nd leg down. Today tested yesterday’s low. That meets the minimum requirement. It then typically evolves into a trading range. It has been doing that over the past 2 weeks.
The 3 week bull channel was strong on the daily chart. Therefore, there will probably be a bounce beginning this week to test last week’s high. However, there might be more of a pullback to below 1.13 first.
The chart is in a 4 week trading range at the bottom of a 4 month trading range. Most days on the 5 minute chart will continue to be trading range days within these bigger trading ranges on the daily chart.