The so far today has a bull body on the daily chart. There are 2 small legs down from the June 10 top of a strong rally. The bulls hope that today will close near its high. Today would then be a High 2 bull flag buy signal bar for Monday.
However, when there is a reversal from a buy climax, the selloff typically reaches the bottom of the most recent buy climax. That is the June 3 low. Therefore, if there is a rally next week, it will probably fail around the June 16 high.
There would then be a small double top forming on the chart at a lower high. Traders would then conclude that the 2 legs down to yesterday’s low was a complex 1st leg down. They would then look for a 2nd leg down from that small double top.
What would make traders conclude that yesterday was the end of the 2 legs down and that the bull trend was resuming? A breakout above the June high would do it. Also, for many traders, a rally that went 20 or 30 pips above the June 16 lower high would be enough.
On The 5-Minute Chart
The 5 minute chart shows the EUR/USD has rallied over the past hour. While today could continue up, all the bulls need is to close near the high. That would then create a good buy signal bar on the daily chart. Next week would then probably trigger the buy signal. Traders would then look for a test of the June 16 high.
Can today reverse back down? The rally is strong and the context is good for the bulls. Today should see the pair either work higher or enter a trading range.
This will make it difficult for the bears to make much money. Day traders are buying. If the rally evolves into a trading range, day traders will switch to buying pullbacks and looking for scalps. Also, the bears will then sell reversals down from scalps.
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