EUR/USD: Tight Trading Range Continues

EUR/USD: Tight Trading Range Continues

Today is the 5th day in a tight trading range on the EUR/USD daily Forex chart. This is a Breakout Mode pattern. That means that there is about a 50% chance of a successful bull breakout or a bear breakout. Traders see it as either a triangle bull flag or a triangle top in a bear rally in a bear channel.

When there is a Breakout Mode pattern, traders expect the 1st breakout up or down to fail. Furthermore, until there is a clear breakout, there is no breakout.

Today broke below the 4 day range but reversed up and it is forming a 5th day in the tight range. This is a failed bear breakout and it increases the chance of a successful bull breakout tomorrow or Wednesday’s.

The bulls are hoping that today will close near its high. Today might even be an outside up day (break above Friday’s high after breaking below its low). If today closes near its high, today will increase the chance of a successful bull breakout tomorrow.

If it instead closes near its low, traders will conclude that the daily chart will begin to test down to the August 1 high.

The overnight 40 pip reversal up from below Friday’s low was mostly in a tight bull channel. That means that the rest of the day will probably be sideways to up.

However, the rally pulled back an hour ago. In addition, it is now getting close to Friday’s high. Today is the 4th consecutive day with slightly lower highs. The bears are hoping to stop the rally and convert the day into a trading range. At the moment, it is unlikely that they will get more than a 30 pip reversal down today.

Because the rally is at the resistance of the top of the 5 day range, it will likely not go much higher today. With limited upside and downside, the 5 minute chart will probably begin to enter a 30 pip trading range.

EUR/USD: Tight Trading Range Continues

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