The EUR/USD Forex market on the daily chart today triggered a higher low major trend reversal buy signal by going above Friday’s high. The month-long selloff had 2 legs down from the March 27 strong rally. It is therefore also a High 2 bull flag buy signal.
Friday was a strong buy signal bar. Traders expect 2 – 4 weeks of sideways to up trading. However, if the rally turns down from resistance, there could be another brief leg down to below last week’s low. If so the month-long bear channel would then probably evolve into a wedge bottom instead of a High 2 bottom.
The chart has been in a trading range for 8 months. Consequently, traders keep looking for legs up and down to reverse every few weeks. This is a good candidate for the start of a leg up. But they also expect disappointment.
There is nearby resistance. This includes the month-long bear trend line, the daily and weekly EMAs, and last week’s high. However, the bears need a strong break below the March low before traders will conclude that a leg up is not imminent.
If the bulls get a series of strong bull days, the rally will probably quickly test the March 27 high. But look at the past month. The bars are small and have prominent tails. They mostly overlap one another. This is trading range price action. Therefore, the rally will probably not race higher.
Traders will be hesitant until they see clear strength. They expect a pause for several days this week for a possible attempt at a double top bear flag at resistance. That will make the bulls quick to take profits.
Overnight EUR/USD Forex trading
The 5 minute chart of the EUR/USD Forex market has rallied for 2 days in a Spike and Channel bull trend. That typically is followed by a break below the bull channel and then a transition into a trading range.
While today triggered a buy signal on the daily chart, the EUR/USD has traded sideways in a a 30 pip range overnight. Day traders have been scalping reversals up or down for 10 – 20 pips.
This is because they see that the daily chart is near resistance and the past month has had mostly trading range price action. They expect the 2 day rally to stall here or around last week’s high.
Day traders are willing to swing trade, but they need to see a series of strong trend bars breaking far above or below the overnight range. That is unlikely. Today will probably remain a trading range day.