EUR/USD Forex Nested Head And Shoulders Bottom
Al Brooks | Dec 04, 2018 11:28PM ET
The EUR/USD daily Forex chart has been in a trading range for a month. The bears want the bear channel to break to a new how. But, the bulls have a head and shoulders bottom. The right shoulder is a smaller head and shoulders bottom.
The EUR/USD daily Forex chart has a nested head and shoulders bottom. That slightly increases the odds of a break above the November highs, which form the neck line. If there is a strong breakout, the rally will likely continue up to the October 16 top of the 2 month bear channel.
Until the bulls begin to form higher highs, the chart is still in a bear channel. That means a bear trend. But, the chart pattern is good for the bulls. In addition, it is forming at support on the weekly chart.
Traders always want high probability trades. When the chart is in a trading range, those trades cannot exist. The chart is sideways because the bulls and bears are balanced. However, the odds are slightly better for the bulls. But, one or two big bear days would flip the odds in favor of the bears.
h3 Overnight EUR/USD Forex trading/h3
The EUR/USD 5 minute Forex chart rallied 70 pips over night. It has been in a 30 pip trading range for 5 hours. As a result, day traders have been scalping.
Since the daily chart is trying to break above a head and shoulders bottom, today’s close is important. The bulls need signs of strength. One sign is a preponderance of bull trend days. In addition, they need those days to close near their highs. Furthermore, they need some of them to close above the high of the prior day and above minor lower highs.
For example, if the bulls can close today above yesterday’s high and above last week’s high, that would be a sign of strength. If not, it would be a sign of strength for the bears.
Therefore, both will fight over those 2 highs today. The bulls will buy 20 – 30 pip selloffs and the bears will sell near those highs. If either can create a strong trend day, which is unlikely, the daily chart will be more favorable for them.
The daily chart has been reversing every few days over the past month. Most days have spent most of their time in trading ranges. Friday’s unemployment report is important. Finally, the overnight rally was weak. These factors make today likely to be another trading range day.
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