The Forex market on the daily chart bounced yesterday after a 2 day selloff from a buy climax. The bulls want this to be a resumption of the bull trend. They are hoping for a strong break above the March high.
However, there is a micro double top and the June buy climax was extreme. Traders expect a 2nd leg down to the June 3 low. That is the bottom of the final strong buy climax, which is a magnet. Less likely, the pullback will test the May 1 neck line of the head and shoulders bottom.
Overnight EUR/USD Forex trading
The EUR/USD Forex market triggered a High 1 buy signal overnight on the daily chart by going above yesterday’s high. However, the breakout was small and the EUR/USD has reversed down.
Traders expect a 2nd leg down after the June buy climax. They, therefore, believed there would be more sellers than buyers above yesterday’s high.
The daily chart has now been in a tight range for almost 3 weeks. The odds favor a lower high and then a test of the June 3 low and the EMA. Traders see this as a pullback in a bull trend instead of the start of a bear trend. That reduces the chance that the selloff will be strong and fall far.
The lack of conviction on the part of sellers will increase the amount of trading range price action during the leg down. Day traders will be willing to buy as well as sell. That has been the case overnight.
Today’s close is important
If today closes on its low, it will be a stronger sell signal bar on the daily chart. Traders would then suspect that the 2nd leg down has begun.
The bulls want today to close above the open and above yesterday’s high. That would increase the chance of at least slightly higher prices before a 2nd leg down begins.
The fight today will be over the close of the day. The bears will sell rallies and try to get the day to close near its low. However, the bulls will buy selloffs and try to get today to close above the open and possibly near the high.
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