EUR/USD: Breakout In Either Direction Possible
Al Brooks | Dec 17, 2021 09:47AM ET
EUR/USD has been in a tight trading range for a month so Breakout Mode. That means 50% chance of a successful breakout in either direction, and a 50% chance that the 1st breakout attempt will fail.
Every trading range always has both buy and sell signals.
Yesterday was the entry bar for Wednesday’s small double bottom buy signal. The bulls hope it is a base that will lead to a reversal up.
However, the bulls need bigger bars and a couple closes far above the trading range before traders conclude that a bull trend has begun. Yesterday was a small bull bar with a prominent tail on top and today so far is a small doji inside bar.
The bears hope the month-long trading range is a bear flag and will lead to another leg down. They want a reversal down today or Monday for another attempt at a double top. This time, with the Dec. 8 high.
Whether or not there is a new low and a test of the June 19, 2020 higher low, traders should expect a rally for at least a couple months to begin here or from a little lower.
The EUR/USD has been in a trading range for 7 years. The current leg down has lasted a year, which is a long time. Traders should expect a bounce soon.
Currency reversals are more common at the start of the year. The current bear trend began on Jan. 6 of this year. Traders should be ready for a possible reversal up in early January.
There is only a 30% chance that this selloff will continue down to last year’s low without a rally of at least for a couple months.
Today is Friday so weekly support and resistance can be important, especially at the end of the day. So far, this week is the 4th consecutive doji bar on the weekly chart.
The more the week closes on the high and the bigger the bull body, the more likely next week will be high.
If there is a bear body, the bigger it is, the more likely next week will trade lower.
Most likely, the body will remain small and traders will try again next week for a breakout.
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