The daily EUR/USD chart is in the middle of a 5-month trading range. Every trading range is a Breakout Mode pattern because it has at least one buy and sell setup.
This one has several. The range has higher lows and lower highs and it therefore a triangle. There is also a head and shoulders top and bottom. Finally, over the past 2 weeks, there is both a small double top and double bottom.
Since the chart is at the apex of a triangle, it will break out within 2 weeks. When a triangle breaks out, there is a 50% chance that the 1st breakout will fail. Furthermore, there is a 50% chance that the final successful breakout will be up and a 50% chance it will be down.
Day traders will look to buy near the bottom and sell near the top. Traders on the daily chart at this point should wait for the breakout. If it is strong and has follow-through, trade in the direction of the breakout. If there is a reversal within a few days, bet on the reversal.
Overnight EUR/USD Trading
The EUR/USD’s 5-minute chart almost completely reversed yesterday’s rally. The overnight selloff has been in a tight bear channel. Day traders will continue to only sell until the selling stops.
Since the selloff is now near yesterday’s low, the bears will take some profits soon. Their profit taking rally (short covering) should convert the bear trend into a trading range.
But after such a strong selloff, the range might only be 20 pips tall. If so, it will be difficult for the bulls to make money. Bears will sell rallies because the chance of a big reversal up after a tight bear channel is small.
EUR/USD Trading Strategies: 07_19_19
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