EUR/USD: Expect A Down Leg
The EUR/USD had a 4-day rally that tested the top of the April 15 sell climax high. The rally was weak compared to the other rallies since theDecember 3 bottom. This increases the chances that the rally is only a minor reversal up from last week’s brief selloff. A minor reversal usually is a bull leg in a trading range, and it is usually followed by a leg down.
The bulls want the rally to break above the top of the 5-month rally and create another higher high is a broad bull channel on the daily chart. The bears want to rally of the last week to reverse down from a lower high major trend reversal. Because of the nested wedge rally over the past 4 months, the odds favor at least a small 2nd leg down to below last week’s low.
The EUR/USD has been in a 35 pip range for the past 24 hours. This means that traders are buying high, selling low, and scalping. The odds are that this will continue today, but that there will be at least a 2nd leg sideways to down that test’s last week’s low. The bears want a breakout below that low. That low is the neck line of the double top of the past 2 days. If today breaks strongly below the overnight low, that could begin a 2nd leg down to test one or more of the higher lows since the current leg up began on March 10. The nearest higher low is the March 25 higher low at around 1.1150.