EUR/USD Forex Market Trading Strategies
Al Brooks | Jun 19, 2018 09:20AM ET
Today is an outside down day after yesterday’s outside up day. Yesterday exactly hit Friday’s high after reversing up from below its low and therefore qualifies as outside up. This is a micro double top bear flag, but it is at support.
The EUR/USD daily Forex chart has consecutive outside bars (an oo pattern). This is therefore a micro double top bear flag. But, it is at support and after consecutive sell climaxes down to the May 29 low. The breakout below yesterday’s low has less chance of leading a 300 pip measured move down. However, it could lead to a 100 pip measured move down based on the height of the 3 day bear flag.
If the bulls get a reversal up from there, the bear flag would be a Final Bear Flag. Furthermore, the reversal up would be a lower low major trend reversal. Major reversal setups have a 40% chance of a bull trend. Most lead to a continuation of the trading range.
While the overnight selloff was strong and the 2 month bear trend is strong, a sell climax down to support usually leads to a trading range. That is still what is likely here. The bears need a strong break below a 100 pip measured move down for traders to conclude that the bear trend is resuming. If there is a reversal up from here or within 100 pips below, traders will conclude that the daily chart entered a trading range at the May 29 low.
h3 Overnight EUR/USD Forex trading/h3
The EUR/USD 5 minute Forex chart sold off 100 pips overnight from yesterday’s high to below its low. Consecutive outside days are more likely to lead to a trend when they reverse a trend. They are less likely to lead to a resumption of a trend. Therefore, bulls will look for a reversal back up over the next week.
The 5 minute chart has been in a 30 pip range for the past 4 hours. The bears want a bear breakout and a close below yesterday’s low. More likely, today will continue the overnight trading range. The minimum goal for the bulls is to have today close above yesterday’s low. That would weaken the bear case and increase the chance of more sideways days. A strong reversal up today is unlikely after such a strong overnight selloff.
Outside down days usually do not fall far below the prior day’s low. This makes further strong selling unlikely today. The minimum goal for the bears is a close below yesterday’s low of 1.1543. If there is not bull trend reversal, they will sell rallies for a test of 1.1543.
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