The EUR/USD daily Forex chart has reversed up for 6 days from the bottom of a wedge bear channel. The rally so far lacks consecutive big bull bars closing near their highs. Consequently, the reversal is weak.
The EUR/USD is now testing the 20-day EMA. The bears expect the rally to be like all of the other rallies over the past 2 years and form a lower high and then lead to a new low.
While they are probably right, there is no top yet. Furthermore, the prior lower highs are magnets above. Also, sometimes a 200 – 300 pip rally begins slowly like this and suddenly accelerates up.
Finally, the rally is so close to the top of the channel that the EUR/USD will probably get there. It can get there by going sideways or up. The next resistance is the September 13 lower high, which is only about 100 pips above. It is therefore within reach.
Unless the bears get a strong sell signal bar or a big reversal down, the odds favor at least a test of the top of the bear channel. But even if the rally continues up to the September or August highs, traders expect the pattern of lower highs and lows to continue.
Overnight EUR/USD Trading
The EUR/USD 5-minute chart has been in a 50 pip range for 4 days. Day traders are therefore looking for small reversals and scalping for 10 pips.
There is no sign that this is about to end. But 4 days is a long time for a tight trading range. Consequently, traders expect a breakout this week.
The bars on the daily chart are small and have prominent tails. Also, there have been many reversals over the past month. Therefore, a breakout on the 5 minute chart will probably not get very far. Until there is a strong breakout up or down, day traders will continue to scalp.
EUR/USD Trading Strategies: 10_08_19
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