EUR/USD Bull Leg In Trading Range
Al Brooks | Jul 28, 2016 09:06AM ET
The 4 hour EUR/USD forex chart shows a rally up from a Higher Low Major Trend Reversal (HL MTR) at the bottom of the trading range. The goal after a HL MTR is a 2nd leg up, and the EUR/USD is having a 2nd leg up. The bull reversal last night was strong enough to have a 2nd leg up as well.
The rally of the past 2 hours qualifies. While there is still room to the bear trend line above, the consecutive buy climaxes up from the low will probably lead to a trading range soon.
The daily chart of the EUR/USD forex market has had 2 legs down in a trading range over the past month. Because the EUR/USD is at the bottom of the range, the probability favors the bulls.
The bulls had a small buy signal bar 3 days ago, and the EUR/USD rallied more overnight. Yet, the bulls have been unable to rally strongly to convince traders that this is more than a leg in the trading range.
Therefore, the bears still have a 50% chance of a bear breakout below the month-long, 200 pip tall trading range. The bears see the rally as a bull leg in a Broad Bear Channel.
EUR/USD Forex targets
The target for breakout traders is a measured move up or down, based on the 200 pip height of the range. Because the EUR/USD is in Breakout Mode, the probability that the 1st breakout will be profitable is 50%. Hence, there is a 50% chance that the breakout will reverse. If the reversal is strong, the market will usually then try to breakout in the opposite direction.
There is no breakout yet. The location is good for the bulls, while the month-long bear trend is good for the bears. Yet, the lack of momentum down means that the selloff is probably a bear leg in a trading range rather than the start of a bear breakout.
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