Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

EUR/USD: Will Today Bring A Strong Bear Reversal On The Daily Chart?

Published 08/06/2019, 09:38 AM
Updated 07/09/2023, 06:31 AM
EURUSD Forex short covering rally on China tariff war

The EUR/USD daily Forex chart rallied 200 pips over the past 4 days after a failed breakout below the 5 month trading range. There was both a month-long wedge bottom and a 4 month expanding triangle bottom. The momentum up is strong enough for traders to expect at least a small 2nd leg up over the next 2 weeks.

However, today so far is a big bear reversal day at the top of the 7 week bear channel and at the EMA. The bears want another lower high and then a new low. This rally would then be just another strong bull leg in the yearlong bear channel.

But this rally is strong enough so that the bears will probably need a micro double top. Traders will buy the 1st 1 – 5 day selloff.

Overnight EUR/USD Forex trading

The EUR/USD 5 minute Forex chart rallied 50 pips overnight and then sold off 70 pips. It spend most of the past 6 hours in a trading range around the open of the day. Traders, therefore, believe that the open is a fair price. Consequently, they think that the 20 pip bear breakout over the past hour might fail.

If today gets drawn back up into that trading range, today would then be a doji bar on the daily chart. That would be more neutral than a big bear reversal bar closing on its low.

Day traders know that today’s close is important. If today closes near its low, today will be a strong bear reversal bar on the daily chart. It would increase the chance of a deep reversal this week.

The bears do not need it to sell off from here. If today closes where it is now, today will be a strong bear bar. Having the day close much lower will not make the bar significantly more bearish. Consequently, there is not much incentive for the bears to sell at the low. They will be satisfied to sell 20 – 30 pip rallies and try to get the day to close near its low.

The bulls know that they probably cannot get today to close back near its high. Their goal is simply to weaken the overnight bear trend. All they need to do is have the day to close near the open. They therefore will buy selloffs and take profits around the open.

Consequently, despite a big bull trend and then a big bear trend overnight, the remainder of the day will probably be a trading range. Traders will be fighting over the location of the close.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.