The daily Forex chart has pulled back in a tight bear channel from the November rally. The bulls need 2 or more good bull bodies before the they can get a 150 pip bounce.
The EUR/USD daily Forex chart has pulled back for 13 days in a tight bear channel. This is becoming an Endless Pullback. It is still a bull flag. That means that the odds favor an attempt to resume the November rally. Yet, if the pullback continues down for several more days, the odds of a bear breakout below the bull flag become as good as for a breakout above. Since it is now testing the November 21 major higher low, it is in the buy zone.
When a bull flag is in a tight bear channel, the bulls usually need at least a couple attempts to rally before they succeed. The pullbacks and bottoms in August, October, and early November are examples. If there is a rally from a tight bear channel, it usually is minor. This means that it can last a week or so, but it usually leads to a test back down to the bottom of the pullback.
Today’s is a major catalyst. It therefore could lead to a big move up or down.
Overnight EURUSD Forex
The EUR/USD 5-minute chart rallied 30 pips in the past few minutes. It is forming a micro double bottom with Friday’s low and a double bottom with the November 21 low. However, since the 3 week selloff is in a tight bear channel, the odds are that any rally will stall around 1.1800. The bulls will probably need a st least several sideways days before they can rally back up to the November high.
Since today’s 11 a.m. FOMC announcement is a major catalyst, most day traders should stop trading around 10 a.m. Because there is a 50% chance of a reversal from the initial breakout up or down after the report, day traders should wait at least 10 minutes after the announcement before resuming trading.