The daily chart of the Forex market is in the middle of a 4-month trading range and in a 2-year bear channel. It has been sideways for 6 days.
Traders are deciding if there will be a reversal up from here for a second leg up from the nested wedge bottom if October 1. They expect a second leg up after the October rally, which was the strongest rally on the weekly chart () in the 2-year bear trend. Last week is a buy signal bar on the weekly chart. Since it is only a doji bar, it will not attract a lot of buyers above its high.
There should be a test of the 12-month bear trend line and of the October high. Both are around 1.20. That is the minimum target over the next 2 months.
However, the chart has been sideways for 4 months. The EUR/USD is equally likely to first test the bottom of the trading range as it is to test the top.
Bulls will buy new low in 2-year bear channel
Even if it falls below the October low, the bulls will buy it. They have bought every reversal up new low for 2 years and it has been a profitable strategy. They will continue to do it until it no longer works.
Can the bears get a strong break below the October low? Probably not. There are measured move targets and a gap down around 1.08. No one yet knows if that support will be tested.
But traders do know that a break below a bear channel only has a 25% chance of leading to a stronger bear trend. The bears are more likely to take profits at a new low than to sell aggressively below the October low.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market had a small reversal up over the past hour. It is now testing Friday’s high and last week’s high. Last week is a weak buy signal bar on the weekly chart.
The bull hope that the 3-week micro double bottom on the weekly chart will be a strong enough base for a 2 – 4 week rally to the October high. Since there has not been a strong bull bar in over 2 weeks on the daily chart, it is probably not enough. Most bulls will therefore wait either for a strong buy signal bar on the daily chart or for a strong bull breakout.
Even though traders expect a rally to 1 – 2 to begin soon, there is not yet a strong buy setup on the daily or weekly charts. Bulls are still willing to buy if there is a Bull Surprise Bar on either chart. A good buy signal bar is a more common start to a trend. Consequently, any rally this week will probably just be part of he 3 week trading range and not the start of a move up to 1.12.
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