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EUR/USD: 2nd Leg Down Likely

ByAl Brooks
Published 09/28/2023, 09:27 AM
EUR/USD
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EUR/USD-Daily Chart

  • The EUR/USD is getting a bear breakout below a bear channel. The recent downside breakout is strong enough to get a second leg down.
  • The problem with the recent bear breakout is that it is late in a bear trend that began in July. This increases the risk of the downside being a climactic end of the bear trend on the daily chart.
  • It is important to note that the tight bear channel on the daily chart is a strong breakout on the weekly chart that will likely get a second leg down.
  • Even if the daily chart converts into a trading range and tests the top of the September 20th sell climax, the odds are that the market will not get above the July high before the bears get a second leg down on the weekly chart.
  • While the downside breakout over the past few days is strong, the market has not touched the moving average in several bars; this increases the odds that bears will be less willing to sell this far from the moving average.
  • Overall, traders should expect a second leg down after the recent downside breakout below the May 31st low. However, traders must realize that the selloff will likely lead to exhaustion, and the market will transition into a trading range. It is reasonable for bears to exit above any bull bar closing above its midpoint due to the risk of exhaustion.

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