The daily chart of the Forex market has rallied extremely strongly from the bottom of the weekly bear channel. This week’s high is just above the top of the channel.
The bulls want the week to close above the bear channel. The top of the channel is bear trend line. If it closes far above the bear trend line, traders will begin to conclude that the 2-year bear trend has ended. They then would see the EUR/USD as either in a trading range or in a bull trend on the weekly chart.
Yesterday was a bear inside day on the daily chart. It was the 1st pause in a 10-day bull micro channel. That makes it a High 1 bull flag buy signal bar for today.
As strong a trend as the bull micro channel is, it is unsustainable and therefore climactic. Also, the EUR/USD is now at the resistance of the 18 month bear trend line, the 1.12 Big Round Number, and the top of the weekly bear channel. A big bear bar at resistance is a weak buy setup. Therefore, there probably will be more sellers than buyers above yesterday’s high. The bulls will probably take some profits within the next several days.
However, they have been so eager to buy that they have been buying above the low of the prior bar for 10 days. Many will be quick to buy at or below the low of the prior day. Consequently, the 1st reversal down will probably last only 1 – 3 days. With buyers below and probably sellers not far above, the EUR/USD will likely go sideways for a week or so.
Overnight EUR/USD Forex Trading
The 5-minute chart of the EUR/USD Forex market rallied strongly overnight. It broke above yesterday’s high to trigger the High 1 buy signal on the daily chart. It also broke slightly above the 1.12 Big Round Number.
However, it has been going sideways for a couple hours. As I said above, this is a weak buy setup. Many bulls will begin to take profits above, expecting a pullback for a few days.
Since the bulls have been strong and they want the week to close above the bear trend line, the EUR/USD might only pull back slightly ahead of tomorrow’s close. It might wait until next week to pull back for a few days.
The fight today will be over yesterday’s high, the 1.12 Big Round Number, and the weekly bear trend line. They are very close to one another. As strong as the overnight rally has been, traders might wait until the end of the day tomorrow to decide if the weekly EUR/USD chart will close above or below the resistance. As much as the bulls want a close far above, this pause exactly at resistance makes a pullback likely over the next few days.
The overnight bull trend has been strong. Also, the weekly chart is important. That reduces the chance of a bear trend today. Traders will buy the 1st 30 pip pullback. But the EUR/USD is stalling at resistance and tomorrow’s close is important. That reduces the incentive for a big rally from here today. Today will probably be mostly sideways in a 30 – 40-pip range for the rest of the session.