EUR/USD Bull Flag In Play
Al Brooks | Jun 15, 2016 01:15AM ET
The EUR/USD 240-minute chart has pulled back from its breakout above a head and shoulders bottom and is testing the neck line. After rallying strongly to the moving average yesterday (not shown), it sold off to a new low, which can be a lower-low major trend reversal (LL MTR). The selloff from the June 8 high is forming a wedge bull flag.
The EUR/USD daily chart has a series of 50% pullbacks over the past couple of months, creating a tightening trading range. It is a type of triangle. The chart is in breakout mode, which means that a strong breakout up or down will probably run for about a measured move based on the 400 – 500 pip height of the 3-month trading range.
All financial markets are likely to reach to the FOMC announcements on Wednesday and in July, and to the Brexit vote next week. No one knows how big the move will be, nor do they know the direction. The EUR/USD chart is neutral. When a market is in breakout mode, there is a 50% chance that the 1st breakout will fail and reverse.
Although yesterday reversed up after pulling back from the rally of 2 weeks ago, the daily chart is probably in a 200 pip trading range, and many traders will wait for a strong breakout from any or all of the 3 news events before they swing trade on the daily chart.
Day traders are mostly scalping, because until the announcements, most traders will be unwilling to hold onto positions for too long. They will buy low, sell high, and take quick profits. The result is a trading range.
The overnight selloff is finding support at the 1.1200 neck line of the head and shoulders bottom of May 26 and June 2 on the 60- and 240-minute charts. I talked about this yesterday. If it bounces today, it will be from a wedge bull flag, a breakout test of the neck line, and a lower low major trend reversal.
Although it sold off strongly over the past 6 hours in Europe, the context makes it likely to stabilize here. It might go sideways and wait for tomorrow’s announcement before deciding between reversing up from support, which is likely, or falling below support, which is less likely.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.