I have been predicting the current candlestick pattern on chart of the EUR/USD for the past month, and describing it as it unfolded. Last night, it broke below the neckline of the head and shoulders top on the daily and 60-minute and 240-minute charts. The bears need follow-through selling today. This means that today is important. If the bears are able to create a strong bear trend day today, the odds will favor a test of the December 3 low. If today’s candlestick pattern is not a bear bar closing on its low or with at least a bear close, the odds are that however deep this selloff goes, as long as it holds above the December 3 low, it will be followed by a 2nd leg up.
The 60-minute chart has sold off for the past 7 hours. The 7-hours down is unusual and therefore climactic, especially within a trading range. The odds are that today will soon enter a trading range. The NYSE opens in 30 minutes. The selloff over the past week has had a series of sell climaxes. This increases the chance that it will enter a trading range soon. Last night’s selling was strong enough so that the 1st leg up will probably be a minor reversal. A minor reversal means that it might go up for 5 – 10 bars (hours) and then test down. The bears will sell the rally. The bulls will be buying the rally for a scalp, expecting the test down. After the test down to today’s low, which probably will not happen until tomorrow, the bulls will be more willing to hold for a swing up, depending on how weak the leg down is and how strong the reversal up from the double bottom is.