The daily Forex chart retraced 50% of the 3-week selloff. The bears want a reversal down over the next few days for a head and shoulders top. The bulls want a pullback from yesterday’s bull breakout, and then a test of the November high.
Yesterday was a strong bull trend day on the EUR/USD daily Forex chart. The bulls rallied from a double bottom with the November 21 low. However, trading ranges resist change. Furthermore, they always have both a good buy setup and a good sell setup. This rally retraced 50% of the 3-week selloff. If it stalls here, it will be the right shoulder of a head and shoulders top.
Since the 3-week selloff was in a tight channel, the rally will probably stall today or tomorrow. The bears will see the pullback as a reversal of yesterday’s rally and the start of a selloff from the right shoulder. The bulls will see the 1 – 3 day selloff as a pullback from yesterday’s bull breakout.
Since the daily chart has been in a tight trading range for a month inside a 2-year range, the odds are that the trading range will continue. This means that both the bulls and bears will probably be disappointed.
The weekly chart is still bullish. The odds are that it will continue sideways. This means that a reversal down will probably bounce at the November low. However, the November high is at major resistance on the monthly chart. Consequently, there is no sign that the 5 month trading range is about to breakout up or down any time soon.
Overnight EUR/USD Forex
The EUR/USD 5-minute chart continued yesterday’s rally overnight. It is now at around a 50% pullback from the 3-week selloff. This is a sell zone. The bulls will take profits and bear scalpers will begin to sell. The chart has been sideways in a 50-pip range overnight. The odds are that it will stall today and day traders will mostly scalp.
Yesterday’s rally was strong enough so that a big reversal down today is unlikely. More likely, the 5-minute chart will enter a 100-pip trading range for a few days. Then, the bulls will try to resume yesterday’s rally and the bears will try to create a lower high on the daily chart.