EUR/USD: 15-Minute Trend Reversal

Published 08/23/2016, 10:36 AM
Updated 07/09/2023, 06:31 AM

EUR/USD

The EUR/USD 15-minute chart broke below the bull trend line and is forming a Lower High. This is a Major Trend Reversal. Yet, there are 7 consecutive bull trend bars and most closed near their high. This is a sign of strong bulls. While the Wedge Top Buy Climax will probably lead to 2 legs sideways to down, Major Reversals only have a 40% chance of actually leading to a reversal. Most evolve into trading ranges. That is likely here.

Since the bull micro channel was strong, the bears will probably need at least a Micro Double Top before the 2nd leg down from the Wedge Top can begin. While it is possible that the overnight rally continues above the Wedge top, the odds of a successful breakout and a Measured Move up are only 40%. There is a 60% chance that the bull breakout would fail because the EUR/USD chart is near the top of a 3-month trading range. If it does fail, it would probably create a Higher High Major Trend Reversal on the 15-minute chart.

Because bears will sell a rally and bulls will buy a selloff, and neither will hold for a swing, the chart will probably enter a trading range for a couple of days.

I wrote yesterday that the August rally on the daily chart was strong enough so that bulls would buy the 1st reversal down. Because of several sideways bars, traders saw the momentum up as waning. Although yesterday was a buy signal bar, today so far has been a weak entry bar. This is consistent with the trading range needing at least a couple more bars. As a result, the odds are that the daily chart will be sideways again today and probably tomorrow.

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