EUR/USD: Dip Likely?
Al Brooks | Oct 15, 2021 10:00AM ET
Yesterday was a doji bar with a big tail on top. So far, today is a second consecutive doji, forming a potential micro double top.
The bears hope it is the second high in a double top with the Oct. 4 high.
They want a reversal down to below the Oct.12 neckline, and then a measured move down.
The bulls hope yesterday was a pullback from Wednesday’s strong reversal up from a micro wedge bottom. They want a reversal up from below yesterday’s low and then a bull trend.
The EUR/USD has been in a tight trading range for 2 weeks. Traders are deciding if it will reach targets below before reversing up, or if the reversal up began this week.
The odds still favor a dip below the Mar. 9, 2020 high within the next few weeks. This is true even if the EUR/USD rallies a little higher. That high was the breakout point for last year’s strong rally, and the EUR/USD has been in a trading range for 6 years. In a trading range, when a pullback gets near support or resistance, it usually goes through it before reversing.
Whether or not the EUR/USD dips below the Mar. 9, 2020 high or the June 10, 2020 high (a less important breakout point), it should rally to above the Aug. 20 low. That is the breakout point for the September selloff and therefore a magnet above.
Consequently, traders should expect a rally for several weeks to at least above the Aug.20 low and maybe to the Sept. 3 high (July 30/Sept. 2 double top). However, it might first fall to 1.14, which is the June 10, 2020 high and the measured move down from the double top.
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