EUR/USD Forex Trading Strategies: The Unexpected Reaction To A Buy Signal
Al Brooks | Jan 23, 2020 09:04AM ET
The daily chart of the EUR/USD Forex market has been in a trading range for 6 months. Over the past month, there is both a double bottom and a head and shoulders top. This is a Breakout Mode pattern. However, when there is a trading range, breakouts usually do not go far. Consequently, traders look for reversals every few weeks.
Yesterday was a buy signal bar for a micro double bottom with Friday’s low and a double bottom with the December 20 low. However, it was a small bar. There is not a violent rejection of the current price for being too low. Also, there are other magnets just below. While traders have been looking for reversals every few weeks, they are not convinced that this 4 week selloff has adequately tested the nearby support of the December 6 low.
Today so far went 1 pip above yesterday’s high. That triggered the buy signal on the daily chart. But instead of racing up, the EUR/USD pulled back.
This is not how a strong buy signal typically behaves. There were as many sellers as buyers above the buy signal bar. Traders are still waiting for more information before concluding that the 4 week selloff has ended or if it will continue down to the December 6 low or November low.
The 5 minute chart of the EUR/USD Forex market has had 4 small sideways days. Traders have been buying below the low of the prior day and selling above the prior day’s high. They need more information before swing trading again. Day traders want to see a 30 – 50 pip strong rally or selloff. Without that, they will continue to look to scalp reversals on the 5 minute chart for 10 pips.
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