The monthly EUR/USD Forex chart has reversed up strongly for 4 bars. It is testing the bottom of the 10 year trading range that ended in 2014.
The monthly EUR/USD Forex chart has had 4 consecutive big bull trend bars. This reversal up from a lower low major trend reversal is very strong. Therefore, the bears will probably need at least a micro double top before they can create a reversal down. Since that would take at least 2 more bars, the downside risk over the next 2 months is small. Yet, because the rally is at the major resistance of the bottom of a 10 year trading range, it might stall for a month or two. Additionally, the 1.2000 Big Round Number resistance is just above.
The daily chart is in a parabolic wedge buy climax. This usually has a bear breakout. The channel then evolves into a trading range. Therefore, that is likely here. Yet, there is no top or reversal down yet. Because the rally is extreme and a buy vacuum up to resistance, it will probably end soon. The pullback will probably last 20 or more days and have at least a couple of legs down. The result will be a trading range. The first target is prior minor higher lows, like the July 26 low. That is about 200 pips below.
Overnight EUR/USD Forex trading
Friday’s rally on the 5 minute chart was strong. It was therefore likely to lead to at least one more leg up. Last might’s rally met that minimum goal. Hence, the bears have the minimum that they need to begin a 200 pip pullback. The reversal down over the past 4 hours was only 50 pips. The bears need a much stronger selloff before traders believe that the pullback has begun. Yet, it was big enough to create confusion. Therefore, traders will probably switch to trading range scalping today.
While it is possible for the bulls to continue to create strong breakouts, the buy climax on the daily charts means that they will take profits at new highs. They will begin to buy pullbacks instead of breakouts. In addition, the bears will begin to sell above prior highs. The result is that the strong bull channel on the daily chart will convert into a trading range soon.