EUR/USD: Trading Range Day Likely
Al Brooks | Oct 22, 2020 09:39AM ET
The EUR/USD forex market on the daily chart is stalling at the Sept. 21 sell climax high, as I said was likely.
Trading ranges often have legs up and down that subdivide into 2 legs. This happened with the Selloff from the Sept. 1 high to the Sept. 25 low. It might now be happening with the rally up from the Sept. 25 low. If the EUR/USD reverses down from here, the reversal would be a Low 2 sell signal in a bear channel that began on Sept. 1.
However, trading ranges resist breaking into trends. Traders expect reversals. Therefore, if today is a sell signal bar on the daily chart, the reversal down will probably just be a bear leg in the trading range instead of a resumption of the bear trend.
This is especially true after 3 strong bull days. Also, the Sept. 10 lower high is a major lower high and it is not far above. When a magnet is nearby, a market usually tests it. That further reduces the chance that today will be the start of the resumption of the bear trend. More likely, today will lead to a 1-3-day pullback, and then the bulls will again try to break above the Sept. 10 lower high.
h2 Overnight EUR/USD Forex Trading/h2The 5-minute chart of the EUR/USD Forex market reversed down from a double top overnight. A double top is a trading range. The breakout below the neck line is now near a measured move down.
Also, the day's range is almost as big as the average range for the past several days. Consequently, there may not be much left to the selloff. If the selling stops, the EUR/USD will probably transition into another trading range. Today would be a trending trading range day. This is what is most likely.
For the past several hours, day traders have only been selling. But since a lower trading range will probably begin to form, they will begin to buy reversals up. Unless there is a surprisingly strong reversal up, they will also sell rallies.
That is what happens in trading ranges. Traders buy low, sell high, and take quick profits. Less likely, the bear trend will continue much lower or it will reverse back up into a bull trend.
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