The daily chart has sold off for 3 days from a wedge bear flag at the 20-day EMA. The bulls need a higher low, which would create a double bottom pullback buy setup.
The EUR/USD daily Forex chart has sold off for 3 days from a bear flag at resistance. They want the selloff to break strongly below the August/October double bottom. The August low is also the neckline of the 500 pip tall July/September double top. A measured move down would be 1.08 over the next several months.
However, the daily chart has been in a trading range for 6 months. Trading ranges resist breaking out. Consequently, if the bears get their breakout, it will probably fail within a few days. There is support around 1.12. A reversal there would be from a wedge bull flag on the weekly chart, using the November and August lows. But, if the bears get a series of bear bars closing on their lows, the breakout would then likely fall at least 200 more pips. Traders would then start thinking that 1.08 was possible.
Overnight EUR/USD Trading
The EUR/USD 5-minute chart has been in a 30-pip range overnight after yesterday’s selloff. If the bulls can rally today, it would then be a buy signal day for Monday. The pattern would be a double bottom pullback.
Alternatively, if the bears can get today to close below last week’s low, this week would be an outside down week. This would create a sell signal bar on the weekly chart. In addition, it would be a break below the August/October double bottom. Even if today closes near its low, it would be a sell signal bar on the daily chart.
Importance Of Friday’s Close
Since the 5-minute chart has been sideways, day traders are scalping. But, today is unusually important. A rally would create a buy signal bar on the daily chart. But, a close near the low will create a sell signal bar on the weekly chart. A close below last week’s 1.1301 low would create a stronger sell signal bar on the weekly chart. These possibilities could affect the next several weeks. There is therefore an increased chance of a breakout up or down today.
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