The daily chart has been in a bull trend for 7 month. Each new high was a wedge top that led to a trading range. This is likely this time as well, especially since the rally is at the top of a 2 year trading range.
While the EUR/USD daily chart has been in a bull trend for 7 months, it is now at the top of a 30 month trading range. There have many many other strong rallies in the 30 months. Yet, each transitioned into a trading range for 1 – 3 months. Furthermore, this rally has a small wedge top. Since the 5 prior wedge rallies to new highs have all led to at least small trading ranges, that is likely here. Since the wedge is in its 3rd leg up and not quite at a new high, the rally might have one more brief new high first.
All trading ranges eventually break out into trends. Yet, my 80% inertia rule says that 80% of strong attempts fail. Consequently, the odds of a strong breakout from here without at least a 2 week sideways to down move are small.
In addition, there have been many rallies on the weekly chart to the top of the 30 week range. Since each led to trading ranges that sometimes lasted several months, the EUR/USD Forex market will probably begin to go sideways.
The EUR/USD Forex market has rallied relentlessly for overnight for 5 hours. Yet, the rally was only 35 pips. Furthermore, the 5 minute EUR/USD Forex chart has been in a 15 pip range for 3 hours. There are no longer many traders willing to buy at the high. This is because of the wedge top on the daily chart. In addition, it is due to the location at the top of the weekly chart.
The odds are that today will be another day with day traders mostly scalping. However, swing trading bears are beginning to sell, looking for a test down to the 1.1356 July 5 low and maybe the 1.1173 June 20 low.
Swing trading bulls are still holding for a test of the 1.12024 August 24, 2015 absolute top of the range. While the rally might eventually get there, the odds are that it will pull back at least 150 pips first. In addition, that pullback will probably begin within a week or two.
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