The forex market on the daily chart has sold off from the January wedge top with 5 bear days. It is now near the bottom of the 2-month trading range. The bears want 2 closes below the January low. If they get that, they will look for a bear trend down to the Nov. 4 low.
The bulls hope that this will be like every other strong selloff since March. They want it to form a higher low, and for the bull trend to resume, like it did after the late October selloff.
What is different now is that there is a wedge rally on the weekly chart and the EUR/USD is near the resistance of the February 2018 high on the monthly chart. This increases the chance of a test down to the November low over the next couple months.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market was sideways for most of the overnight session, but it broke strongly to the downside over the past 3 hours. When there is a break below a trading range that lasts several hours, the breakout usually is relatively brief, and then the EUR/USD goes sideways again.
That is a Bear Trending Trading Range Day. The bears want the day to accelerate down, and the bulls want it to reverse back up to the initial trading range. But the most common outcome is two or three quick legs down in a sell climax, and then exhaustion followed by another trading range.
When the EUR/USD is in a strong bear breakout, as it is at the moment, day traders are only selling. But if there is a 30-pip bounce, which is likely within a couple hours, they will begin to bet on a trading range. The bulls will look to buy reversals back up from new legs down, betting on a trading range. There is a 20% chance that a reversal up will continue back up to the high of the day. The bears will switch to selling rallies instead of selling at the market.
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