The daily chart of the Forex market sold off overnight to far below yesterday’s low. Yesterday was a Low 2 bear flag sell signal bar and the December lows are magnets below. Also, the January 10 buy setup was weak. The EUR/USD will probably test those December lows next week.
By going below yesterday’s low, the today triggered the bear flag sell signal. So far, the day is at its low and far below yesterday’s low. If today closes near its low, the EUR/USD will probably continue down next week to those December lows, which are about 100 pips below.
The bears want a break below the November 29 low. That is the bottom of the 4 month trading range. If they get 2 closes below that low, they will then try for a break below the October low. That would be a new low in the 2 year bear trend and it would erase the possibility that the 4 month rally was the start of a bull trend on the weekly chart.
The has been in a bear channel for almost 2 years, Traders have been buying below support and selling above resistance, expecting 2 – 3 week legs that are about 200 – 300 pips tall. Nothing has changed. There will be buyers around the December or October lows.
The 5 minute chart of the Forex market has been selling off in a tight bear trend overnight. However, it lost momentum 2 hours ago. The bars have become smaller and the EUR/USD has spent a couple hours in a tight trading range. That reduces the chance of it falling much lower today.
The bears will switch from selling at the market to selling rallies. Additionally, they will begin to take some profits around the low of the day. This loss of momentum reduces the chance of the trend continuing much lower today.
Also, the bulls will begin to look for reversals up for 10 pip scalps. But they will need bigger bounces before they have a reasonable chance of a bull trend reversal.
At the moment, a bull trend reversal is unlikely. Today’s bear channel will probably evolve into a 20 – 30 pip tall trading range for the remainder of the day before it falls much further.
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