The forex market on the daily chart formed a wedge bear flag over the past 2 weeks. Yesterday was a good sell signal bar. By going below yesterday’s low overnight, the sell signal on the daily chart triggered.
However, the EUR/USD immediately reversed back up. Today so far is a bull bar and therefore a terrible entry bar for the bears.
The 2-week rally has been in a Small Pullback Bull Trend. The Sept. 21 sell climax high is a magnet above. If the bulls can break above it and above the Sept. 10 high, traders will look for a test of the September 1 high.
The EUR/USD is back in its 2 month trading range. That means there is also always both a bull trend and a bear trend. If it continues down in a series of lower highs and lows, traders will say the bear trend began on Sept. 1. If the 2-week rally continues up to above the Sept. 1 high, traders will say that the 4 month bull trend resumed on Sept. 25.
Because of the wedge top at resistance on the weekly chart (not shown), the odds are slightly better for the bears. But the EUR/USD is back in its 2 month trading range. Consequently, the odds are only slightly better than 50%.
Overnight EUR/USD Forex Trading
The 5 minute chart of the EUR/USD Forex market traded below yesterday’s low overnight, which triggered a sell signal on the daily chart. However, the breakout was small and the EUR/USD reversed back up. The bulls want today to break above yesterday’s high. Today would then be an outside up bar after yesterday’s sell signal bar. That would increase the chance of a test of the September 21 sell climax high.
If today closes near its high, traders will see today as a buy signal bar. They would wonder if the wedge bear flag on the daily chart failed and if the Small Pullback Bull Trend is continuing up.
The reversal up from below yesterday’s sell signal bar makes a bear trend unlikely today. While the EUR/USD has been in a bull trend for 8 hours, the trend has not been particularly strong.
It has been easier to make money as a bull, but there has been a lot of trading range price action for 5 hours. That means that day traders are also willing to sell reversals down for scalps.
With the lack of energy for several hours, today will probably not go much higher. The rally will probably stall around yesterday’s high.
The fight will then be over the close. The bulls will buy selloffs, trying to get today to close near its high. That would make higher prices likely tomorrow.
The bears will sell rallies. They know today will remain a bull day, but if they can get the day to close in the middle of the range, they will try to break again below yesterday’s low tomorrow.