The EUR/USD daily Forex chart yesterday formed a big bear trend day closing near its low. It was a Low 1 bear flag. The bears see is as a pullback from the breakout below the 4 month trading range. Today therefore is the entry bar for the bears.
But, the breakout is not yet far below the 4 month range. In addition, there have not been consecutive bear days closing below the range. Therefore, the probability of a successful breakout is only slightly better than 50%. If the bears can get the day to close near its low, the odds of a successful breakout will go up. They therefore will sell rallies today.
The bulls see the selloff from the January high as 2 legs down in a trading range. Because the 2 week selloff has been strong, they need a micro double bottom to get a reversal up. Consequently, today is a potential buy signal bar for tomorrow.
The bulls need a strong buy signal bar to make traders willing to buy. They therefore want today to close near its high. Day traders should therefore look for buy setups and a close near today’s high.
Overnight EUR/USD Trading
So far today, the bulls have been winning. The day is currently a bull trend bar on the daily chart. There has been a 40-pip rally over the past 10 minutes on the 5-minute chart.
If the bulls can maintain the rally, the odds will favor higher prices over the next few days. They need to buy any 20-pip selloff and keep the day near its high.
But, if the bears can reverse this rally back down to below the midpoint of the day’s range, the bears will probably of a successful breakout below the 4-month range will increase.