The daily chart is pulling back from a strong breakout above a 4-month trading range. Today so far is an inside day, and yesterday was an outside day. This is an ioi (inside-outside-inside) Breakout Mode pattern. Additionally, it is a 2nd attempt to resume up (yesterday was the 1st) and therefore a High 2 bull flag.
If today closes near its high, it would be a sign that the bull trend is likely to resume tomorrow. Today would be a reasonable buy signal bar for tomorrow.
The bears see last week’s rally as a buy climax. They want it to fail and for the EUR/USD to reverse down to the November low. The reversal down so far is small, but it has 4 bear bars and there is not yet a strong buy setup. They hope to continue to prevent good buy signal bars and to have the pullback grow endlessly (Endless Pullback) into a Small Pullback Bear Trend.
Last week’s breakout was strong enough to make at least a small 2nd leg up likely. But it was extreme, and this could result in the pullback lasting a few more days. It might have to test the September 1 high (Breakout Test) before the bulls become aggressive again.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market rallied overnight from yesterday’s open. However, the rally is part of an Expanding Triangle, which is a type of trading range. Therefore, day traders have been selling as well as buying, and they have been looking for quick profits.
Today will probably be all about the close. Since today is a potential buy signal bar for tomorrow, the bulls want the day to close near its high. The bulls will continue to buy pullbacks to make that happen.
The bears will sell whenever today is near the high. They do not want today to close near the high because they know traders will then be more willing to buy tomorrow. It would increase the chance that the bull trend on the daily chart will resume.
What happens if today has a bull body on the daily chart, but it has a prominent tail on top? It would be less bullish, and the EUR/USD would be less likely to resume up tomorrow. But it would increase the chance that the selloff is ending and that a small trading range beginning, and reduce the chance that tomorrow will be the start of another strong leg up.
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