EUR/USD Bull Flag, But At Resistance
Al Brooks | Jan 22, 2018 09:51AM ET
The EUR/USD daily Forex chart is in a bull flag. Since the momentum up was strong 2 weeks ago, the probability favors a bull breakout. Yet, the monthly chart (not shown) is testing the resistance of the bottom of a 10-year trading range and it might form a wedge top this month.
The EUR/USD daily Forex chart has been in a tight trading range for 6 days. Because the trend before it was up, the odds favor a bull breakout. Yet, this yearlong rally is now testing the bottom of a 10 year trading range. In addition, the rally since the May 2016 high is a wedge. Consequently, if the bears get a strong reversal down in February or March, the daily chart will probably trade sideways to down for several months.
The bulls need a strong breakout above 1.2500. If they get it, the rally would then probably continue up to the 1.4000 area over the next 2 years, which is a major lower high on the monthly chart. A reversal down and a trading range is more likely over the next 6 months. This is because the rally is a wedge, and it is a 50% pullback of the 2014 selloff. Finally, it is testing the resistance at the bottom of a 10-year trading range.
h3 Overnight EUR/USD Forex Trading/h3
The 5-minute chart has been in a 200 pip trading range for 6 days. In addition, it is forming lower highs and higher lows. This is therefore a triangle. The legs overnight were about 60 pips tall. Day traders will scalp today, unless there is a strong breakout up or down.
When there is a triangle, there is a 50% chance that the 1st breakout will fail. Furthermore, once there is a successful breakout, there is a 50% chance that it will be either up or down.
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