EUR/USD Low 1 Bear Flag After Breakout Below Final Bear Flag
Al Brooks | Aug 14, 2018 09:16AM ET
The EUR/USD daily Forex chart had a small bull day yesterday after a strong breakout below a trading range. There will probably be at least a small 2nd leg down this week. If today’s low stays above yesterday’s, today will be a Low 1 bear flag sell signal bar.
The EUR/USD daily Forex chart broke far enough below the 3 month trading range to make lower prices likely. A trading range late in a bear trend is usually the Final Bear Flag. Therefore, this breakout will probably reverse back up into the range after it runs its course. There is a 50% chance of a measured move down to around 1.12 over the next 2 months.
Yesterday was a bull bar and a pause in the bear breakout. If today’s low stays above yesterday’s low, today will be a Low 1 bear flag. The odds favor at least a small 2nd leg down. But, the price is far below the the EMA. Consequently, many bears will only scalp here. Traders will be ready for the break below today’s low to reverse up within a couple of days. This might form a micro double bottom with yesterday’s low.
h3 Might get breakout test of 1.15/h3While the bulls want a failed breakout and a reversal up, the best they probably will get is a bigger bear flag. The rally might test the 1.15 bottom of the trading range and the EMA before the bears begin a 2nd leg down.
Since the past 2 days have been sideways, there is an increased chance of more sideways trading today. Furthermore, there will probably be a test the 1.15 within a couple of weeks. Therefore, bulls will buy a reversal up to that level.
h3 Overnight EUR/USD Forex trading/h3
The EUR/USD 5 minute Forex chart has been in a 50 pip range for 2 days. This is a bear flag on the 60 minute chart. But, the 2 day selloff was extreme and therefore climactic. Consequently, traders know that there is a 40% chance of a 100 pip rally within a week. They therefore will look for a rally that could last a couple of weeks.
Since the bears expect at least 1 – 2 days of follow-through selling after this 2 day pause, the bulls will watch to see if that selling is weak and brief. If they sense that the bears are only scalping, the bulls will look to buy for a 100 reversal up over the next week or two.
The bears know that there is a 60% chance of at least one more day down this week. But, because the daily chart is so far below the EMA, they will be quick to take profits. They want to sell closer to the average price.
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With both bulls and bears expecting limited selling and a 100 pip rally soon, day traders will be willing to buy and sell. If reversals are strong, they will swing trade for 30+ pips. But, because the odds are that the sell climax on the daily chart will lead to a trading range for a couple of weeks, most day traders will be scalping.
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