The Forex market on the daily chart rallied three days after a strong breakout below the Feb. 5 low. Yesterday is a Low1 sell signal bar, and the Nov. 4 low is a magnet below.
However, the selloff was extreme and, therefore, climactic. Also, there have been three legs down from the January high and, therefore, the bear channel is a wedge. The three-day reversal up was strong enough for traders to expect at least a small 2nd leg up. Also, yesterday was a bull bar closing near its high, and therefore a weak sell signal bar for today. Consequently, while yesterday is a sell signal bar in a bear trend, there probably are more buyers than sellers below its low.
Today is Friday, and weekly support and resistance can be important. The EUR/USD is now trading just above the open of the week, so the weekly candlestick is a bull doji, which is slightly bullish. The bulls want the week to close on its high. This week would then be a good buy signal bar on the weekly chart. That would increase the chance of higher prices next week. But the bears want lower prices. Their odds will go up if this week has a bear body and closes below the midpoint.
Overnight EUR/USD Forex Trading
The 5-minute chart of the EUR/USD Forex market sold off overnight from yesterday’s close. It traded below yesterday’s low and completely reversed yesterday’s rally. The bears want today to close near its low. Today would then be the second bar of a two-bar reversal on the daily chart. Traders would see today as a better sell signal bar for Monday. Also, if the week closes below its midpoint, fewer traders would be willing to buy above this week’s high.
The bulls want the week to close above the open. After the overnight strong selloff, today will probably not close at the high of the week, so this week will likely not be a strong buy signal bar on the weekly chart. The best the bulls probably can get is a close above the open of the week. The reversal up over the past three hours was big enough, so that the bulls have at least a 50% chance of achieving their goal.
Day traders only sold early in the session, but they bought below yesterday’s low, and the EUR/USD has rallied 30 pips over the past three hours. That is enough so that bulls will buy pullbacks. Since a reversal up to yesterday’s high is unlikely, today will probably be sideways. Day traders will look to scalp in both directions. The fight will be over the close of the week. The bulls will try to get the week to close above the open and the bears want a bear close on the weekly chart. This week will probably close near the open, with either a small bull or bear body on the weekly chart.