The forex market on the daily chart has 3 consecutive big bear bars closing on their lows. This is coming after a strong rally since the Nov. 4 low, and a trading range since Dec. 4.
I have been saying that there would be an increased chance of a reversal down for several weeks beginning in early January. If today closes on its low, there will be an increased chance of 2 or 3 legs down.
The first target is the bottom of the trading range at the Dec. 9 low. If the bears get a couple closes below that, traders will wonder if the selloff will continue down to the Nov. 4 low.
What could change the outlook? If today closes in the middle or top of its range, or if tomorrow is a strong bull bar, the bulls will have a chance of resuming the 3-month bull trend. But if today closes in the bottom third of its range, traders will expect a test down to at least the Dec. 9 low. Also, they will expect at least a couple legs down, and for the selloff to last 2 to 3 weeks at a minimum.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD forex market has been trading down for 3 days in a bear channel. While this is good for the bears, bear channels usually do not last more than 3 days. Traders should expect a transition today.
There is a 25% chance of a collapse and an acceleration down into a much stronger bear trend. More likely, the EUR/USD will start to go sideways. If the bulls can stop the selling for a day or two, they will then try to reverse the selloff.
However, because of the wedge top at resistance on the weekly chart, traders will sell the 1st bounce on the daily chart. The odds currently favor lower prices.
But the bear channel on the 5-minute chart will attract buyers today or tomorrow for a 1- to 2-day bounce. Day traders know this and will look for reversals up from the low for scalps up. They will continue to look to sell rallies unless the bulls can create a very strong reversal up on the daily chart and resume the bull trend. The odds favor lower prices in the EUR/USD Forex market for a few weeks.
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