The daily Forex chart rallied for 3 weeks in a parabolic wedge buy climax. While the rally is a bull trend reversal, it is also a buy vacuum test of resistance. A buy climax to resistance usually makes bulls take at least partial profits. This stops the rally and often leads to a pullback. The sideways to down move typically has at least a couple legs and often lasts about 10 bars. Therefore, the daily chart will probably be mostly sideways for at least another week.
The bulls might get one more small leg up to around 1.1750 and the July 31 high before there are a couple legs sideways to down. However, the rally stalled in the middle of a 4 month trading range. That is a sign that traders still believe that the trading range is the appropriate price.
Can the chart reverse back down from a lower high and continue a broad bear channel on the daily chart? Probably not because the reversal up was surprisingly strong and the weekly chart is still in a bull trend.
Can the 3 day pullback form a High 2 bull flag and lead to a strong breakout above the range over the next week? That, too, is unlikely. A parabolic buy climax reversal is usually an attempt to fix a price that was clearly too low. The price is now back to what has been normal for 4 months. Traders will probably need to trade in this range for at least a couple of weeks before they can conclude that the price is still too low.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart sold off about 50 pips overnight after yesterday’s outside down day. Since the daily chart is now probably in a tight range, day traders will look to buy reversals up from below the prior day’s low and sell reversals down from the prior day’s high. Support is at the 20 day EMA and the August 23 pullback low.
That means that the pullback will probably continue down to around 1.1550 over the next week. Day traders will sell rallies and bulls buy new lows on the 5 minute and daily charts, looking for 10 – 30 pip scalps. Some legs might last 4 or more hours, but day traders will probably have a hard time making more than 30 pips on a trade over the next week.
The bulls might get one more small leg up to around 1.1750 and the July 31 high before there are a couple legs sideways to down. However, the rally stalled in the middle of a 4 month trading range. That is a sign that traders still believe that the trading range is the appropriate price.
Can the chart reverse back down from a lower high and continue a broad bear channel on the daily chart? Probably not because the reversal up was surprisingly strong and the weekly chart is still in a bull trend.
Can the 3 day pullback form a High 2 bull flag and lead to a strong breakout above the range over the next week? That, too, is unlikely. A parabolic buy climax reversal is usually an attempt to fix a price that was clearly too low. The price is now back to what has been normal for 4 months. Traders will probably need to trade in this range for at least a couple of weeks before they can conclude that the price is still too low.
Overnight EUR/USD Forex trading
The EUR/USD 5 minute Forex chart sold off about 50 pips overnight after yesterday’s outside down day. Since the daily chart is now probably in a tight range, day traders will look to buy reversals up from below the prior day’s low and sell reversals down from the prior day’s high. Support is at the 20 day EMA and the August 23 pullback low.
That means that the pullback will probably continue down to around 1.1550 over the next week. Day traders will sell rallies and bulls buy new lows on the 5 minute and daily charts, looking for 10 – 30 pip scalps. Some legs might last 4 or more hours, but day traders will probably have a hard time making more than 30 pips on a trade over the next week.
