EUR/USD Forex Minor Bull Leg In Early Bull Trend

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EUR/USD Forex Minor Bull Leg In Early Bull Trend

EURUSD Forex

While the EUR/USD daily Forex chart rallied strongly this week, the rally followed a tight bear channel. Therefore, the bulls will probably need a test down next week. The day so far is a small bear trend day at the resistance of the October 3 high, the 20 day EMA, and a 50% retracement. The buying is drying up at this resistance.

The EUR/USD daily Forex chart retraced half of he October 9 selloff. While the bears want this rally to be a bear flag, it is more likely the first of at least 2 legs up in the 6 month trading range.

A trading range is a neutral environment, which means that the direction of the eventual breakout is as likely to be up as it is to be down. There are factors that change the odds. Here, the monthly chart is in a bull trend. Additionally, the bulls got a dramatically strong reversal up from a breakout below the range. Both of these features make it more likely that the eventual breakout will be up.

However, trading ranges have many strong legs up and down that look like they will successfully break out. But, 80% of trading range breakouts fail. Therefore, a trader will make more money betting on reversals than on trends until after there is a clear breakout.

The daily chart is in the middle of the range. When that is the case, the legs often are brief. At the moment, the bulls will probably need some kind of double bottom with this week’s low before they will be able to test the top of the range at 1.18.

Traders understand the implication of the August bull trend reversal. They therefore will buy strong selloffs to just below the middle of the trading range instead of waiting to buy at the bottom. This will probably result in buyers around this week’s low.

Overnight EUR/USD Forex trading

The EUR/USD 5 minute Forex chart drifted down 40 pips in a weak bear channel overnight. Most of the bars were small, had prominent tails, and overlapped several prior bars. This is trading range trading. Day traders have been scalping for 10 pips. There is no sign that this is about to change today.

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