The daily chart of the EUR/USD Forex market has sold off for 6 days. Last week was a big bear bar closing near its low on the weekly chart (not shown). Traders will want to know if there will be more buyers or sellers below the low of that sell signal bar.
There was a strong rally 2 weeks ago. Also, the selloff is now at the bottom of the 7 month trading range. Furthermore, each of the past 5 days had a conspicuous tail on the bottom of the bar, which is a sign of buying. These factors make a bounce likely early this week.
Therefore, while the bears will probably trigger the weekly sell signal by getting a break below last week’s low, there will probably be more buyers than sellers there. Traders expect a 3 – 5 day bounce to start this week.
Overnight EUR/USD Forex trading
The 5 minute chart of the EUR/USD Forex market has sold off in a broad bear channel overnight. The low so far is 10 pips above last week’s low. Traders expect a reversal up from around last week’s low.
This week could reverse up from above last week’s low and form an inside bar on the weekly chart. But 6 consecutive bear bars represents relentless selling. It is, therefore, more likely that the EUR/USD will fall below last week’s low either today or tomorrow.
However, as I said above, the weekly sell signal will probably fail. There will probably be more buyers than sellers below last week’s low. The odds favor a 200 pip bounce to begin this week.
What about today? The overnight selloff has lacked momentum. The bars are small and the bulls have been able to make money in the bear trend.
Day traders will continue to buy selloffs and sell rallies today. While the EUR/USD might fall below last week’s low, there will probably be buyers below. That limits the downside today.
Even though there might be buyers, the bars and legs are small. That lack of energy will limit the upside.
Today will therefore probably transition into a trading range. The bulls want the day to close above the open so that the streak of 5 consecutive bear days will end. That would increase the chance of a bounce this week.