EUR/USD: Bear Breakout Testing Support
While the EUR/USD 60 minute chart rallied twice in the past 4 days, the rallies have not been as strong as the selloffs. As a result, a trading range is more likely than a Major Trend Reversal (MTR). If the bulls get a reversal here, it would also be a Head and Shoulders Bottom (HSB).
The EUR/USD 60-minute chart had a weak rally yesterday. It therefore was probably a minor reversal. Yet, it formed a micro double bottom and sell climax on the daily chart over the past week. Therefore, the odds are that the EUR/USD Forex market will trade sideways to up for another day or two. At that point, it will choose between a break below the July 25 higher low and a rally up to the September 21 low. That was the breakout point of the September trading range.
The EUR/USD Forex daily chart is trying to form a double bottom bull flag with the July 25 low. While the selloff of the past couple of weeks has been strong, the bulls think it is just a Sell Vacuum test of support. Since there is now a Micro Double Bottom, they are hoping for a 150 rally to test the bottom of the September trading range. Because the selloff was so strong, the bulls will probably need more sideways days or a strong bull breakout to achieve their goal.
Testing Bottom Of Trading Range
Since the EUR/USD raced down to support and stopped, the bear case is not strong. Strong bear trends typically break below support before pausing. Furthermore, the market has been in a trading range for almost 2 years. While it eventually will break out, the odds of any attempt being successful are small. Therefore, this one will probably be like all of the others. As a result, it probably will fail to fall below the December 4 higher low.
While last week was a big bear trend bar closing on its low and breaking below a 2 month range on the weekly chart, the bears need follow-through selling. If this week is not another big bear trend bar closing near its low, the odds are that the bear breakout will soon reverse back up.
Overnight EUR/USD Forex
The EUR/USD sold off overnight, but the range was only 35 pips. Furthermore, the selloff lasted only 2 hours and the market is now bouncing. The odds are that today will continue to hold support around the July 25 low today. Furthermore, it will continue to decide whether it will reverse up from the 60 minute reversal pattern. The bears want a bear flag and the bulls want a trend reversal.