The bulls are trying to get a micro double bottom with Friday’s low and a double bottom with the November 21 low. The bears need a strong break below that low for a test of the bottom of the 5 month range. After 2 doji bars just above support, today will probably be a small day.
The daily chart retraced about 50% of the November rally. It is now just above the November 21 major higher low. Since legs in trading ranges usually go past support and resistance before reversing, the odds are that this selloff will test 1.1712. The bulls want a double bottom with that low and a micro double bottom with Friday’s low. The odds are that there will be at least a 100 – 150 pip bounce from that level.
The bears want the 3-week selloff to continue down to below the bottom of the 5-month trading range. However, trading ranges resist breakouts. Furthermore, successful breakout usually follow strong legs. Since this leg lacks consecutive big bear trend bars it is not strong. Hence, the odds are against a strong breakout below the November 7 low of 1.1553. More likely, this selloff is just a leg in a trading range. It therefore will probably bounce soon at the support of the November 21 low.
There is an tomorrow at 11 a.m. PST. Since there is always a potential for a surprise announcement, there is a reasonable chance of a big move after the news. However, the daily chart will probably remain in its trading range and bounce within a week.
Overnight EUR/USD Forex
The 5-minute chart just broke below yesterday’s low. However, Friday’s low is support. In addition, the past 2 days were doji bars on the daily chart. That increases the odds of a doji bar today. Doji bars have tails, which means reversals. There is therefore an increased chance of a reversal up today or tomorrow, possibly after the 11 a.m. FOMC announcement tomorrow.