The EUR/USD daily Forex chart formed an inside day yesterday. It is therefore a buy signal bar for today. Because it had a bear body, it is a weak buy setup. There might be more sellers than buyers above its high.
Furthermore, the 3-week rally is a wedge bull channel. That is a buy climax pattern. In addition, it might be forming a double top with the April 12 high.
Traders can see that Thursday’s consecutive outside bar had a big tail on top. That increases the chance of a pullback before rallying further. The low the outside bar is a higher low and therefore a magnet below. Also, a test of that low would be around a 50% pullback and a test of the 20 day EMA.
Most importantly, the chart has been in a bear channel for a year. Every rally and selloff reversed after a few weeks. There are probably enough traders expecting a continuation of this tendency to lead to a pullback over the next week.
This is especially true since all financial markets will be prone to getting neutral ahead of next week’s FOMC announcement.
Overnight EUR/USD Forex trading
The EUR/USD 5-minute chart has been in a 30 pip range overnight. Since yesterday is a weak buy signal bar on the daily chart, there will probably be more sellers than buyers above yesterday’s high.
This is especially true in light of all of the issues that I mentioned above. Consequently, day traders will look to sell rallies to around yesterday’s high.
Where will they buy? Many will buy around yesterday’s low, but Friday’s higher low on the 240-minute chart is more important support at around 1.1250.
So far, traders have been looking for scalps on reversals near the top and bottom of the overnight range. However, the rally on the 240-minute chart over the past 3 days has had 3 legs up. It is therefore a wedge and it is nested within a bigger wedge on the daily chart. Since a wedge is a buy climax, traders expect at least a couple legs down over the next few days. Day traders will be more willing to sell than buy today, unless the bulls get a surprising big bull breakout. But that is unlikely.
EUR/USD Trading Strategies: 06/11/19
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