The forex market on the daily chart is in a 2-week trading range at the top of a 4-month trading range. The bulls see these 2 weeks as a bull flag and want a breakout above the Sept. 1 high. The bears want a reversal down from a double top with the Sept. 10 high or the Sept. 1 top of the 4-month range.
Everyone knows that there will be a breakout above or below the 4-month range at some point, but look at the chart. There have been many strong legs up and down, and each has reversed. Traders look to sell reversals down from the top and buy reversals up from the low.
We do not know if the Nov. 19 high is high enough up for the bears to sell aggressively. The past 2 sideways weeks mean that traders are deciding if the Nov. 9 high will be the start of a swing down or if the EUR/USD will go up to the top of the 4-month range.
Since yesterday was a small sell signal bar and it followed 4 bull days, this is not a strong top. That means it is still slightly more likely that the EUR/USD will go sideways more, or test up to the Sept.1 high. But a couple big bear days will flip the odds in favor of a breakout below the Nov. 11 low and a test of the bottom of the range.
The bars have been small and the tails have been prominent for several days. That means traders think the price is just about right, and it increases the chance of another small day today.
Overnight EUR/USD Forex trading
The EUR/USD Forex market broke below yesterday’s low overnight. This triggered a minor sell signal on the daily chart.
While the EUR/USD has traded down on the 5-minute chart overnight, it has been mostly sideways. There was a trading range, a brief bear breakout, and then a lower range. This is a Bear Trending Trading Range Day, which is a weak type of bear trend.
The emphasis is on the words “Trading Range.” Day traders are looking for reversals and small profits. While it is possible for any day to suddenly become a strong trend day, traders are currently betting against it and taking scalps up and down.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.