The forex market on the daily chart is reversing up from the bottom of a 2-month trading range in a bull trend. However, yesterday was a bear bar, and that is a weak buy signal bar. Also, the selloff was strong. That makes it likely that the 1st leg up will be minor.
For example, it might stall at the Jan. 13 high. The bears will try to create a double top with that high. If there is a lower high, the bears will hope that it is the start of a lower high major trend reversal. It would also be a head and shoulders top. A major reversal has a 40% chance of actually leading to a reversal into a bear trend. More often, the market continues sideways.
Don’t forget the Jan. 6 wedge top. A reversal down from a wedge top usually has a couple legs. While there is a 2nd leg down that began on Jan. 13, when the 2nd leg begins within a tight bear channel, the entire channel is usually just a complex 1st leg down. Consequently, unless this rally becomes very strong this week, traders will expect at least a test of yesterday’s low after a test of the Jan. 13 minor lower high.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market rallied strongly overnight. Day traders have only been buying.
Since the day’s range is almost as big as most of the big days of the past month, there is probably not too much left to the rally today. If the EUR/USD starts to go sideways, day traders will switch to scalping.
If the trading range is about 30-pips tall, day traders will also begin to sell for scalps. There is only a 20% chance that today will reverse back down to the low.
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