The EUR/USD daily Forex chart pulled back for 3 days from another breakout above the top of the 4-month trading range. This is a bull flag, but the location is bad. Most trading range breakout attempts fail. Consequently, there are probably more sellers than buyers above Friday’s high.
However, this trading range has lasted for 4 months. Every trading range over the past several years has broken out after 2 – 4 months. Therefore, this range will probably convert into a trend up or down this month.
The bulls have been getting higher lows for 2 month. In addition, on the monthly chart, the 2018 bear trend is a wedge bull flag and a 50% pullback. These factors make a bull breakout slightly more likely than a bear breakout.
But, it is important to realize that the probability is only slightly better. If the odds strongly favored the bulls, the trend would already be underway. Since it is not, the bulls and bears are still about equally strong.
Overnight EUR/USD Forex Trading
The EUR/USD 5 minute chart has continued its 2-day tight trading range overnight. The range has been only 15 pips over the past 5 hours. That makes it difficult to make even a small scalp. However, day traders will look for scalps until there is a strong breakout up or down. There will probably be at least a small breakout today or tomorrow.
The past 3 days have been sideways and the range has been shrinking. Therefore, the 5-minute chart is in Breakout Mode, just as the daily chart’s 4-month trading range is a Breakout Mode pattern.
On the 5-minute chart, traders will pay attention to the highs and lows of the past 2 days. The bears will sell near the top and above, betting that the 4-month range will continue. The bulls will buy near the bottom and below, betting that any reversal down will form a higher low after the 2-week rally.