EUR/USD In 3-Day Pullback
Al Brooks | May 14, 2021 10:52AM ET
o Three-day pullback from double bottom bull flag (April 22 and May 5)
o Double bottom pullback buy signal triggered today when today went above yesterday’s high
o Yesterday was a bull doji day, which is a weak buy signal bar
o But it is also bad follow-through for the bears after Wednesday’s big bear bar.
o Bears are hoping that Wednesday’s selloff is the start of a two-week leg down, and not just a pullback in the six-week bull trend.
o Bears need reversal down today, or Monday, for lower high major trend reversal.
o Because yesterday was a bad follow-through day for the bears, and last week’s two-day rally was strong, the odds slightly favor slightly higher prices, and possibly a test of May 11 high next week.
o Bad follow-through for the bears and a weak buy signal bar means confusion, which is a hallmark of a trading range. Traders expect every strong leg up or down to reverse.
o The EUR/USD has been sideways for four weeks, and it is back in the January/February range. There is now a five-month trading range, and it is within a 10-month trading range.
o Since the April rally was strong, EUR/USD might have to go sideways to up for another couple weeks, before the bears might be able to get a leg down to the bottom of the 10-month range.
o Today is the last trading day of the week. This week so far is a bear bar on the weekly chart. The more this week closes near the low of the week, the more likely next week will trade down.
o The more this week closes toward the middle or high of the week, the more likely next week will trade sideways to up.
h2 Overnight EUR/USD Trading On 5-Minute Chart/h2o Early strong rally for 1st half of overnight session. It triggered a buy signal on the daily chart when it went above yesterday’s high.
o Since there was a 30-pip selloff a few hours ago, there is an increased chance of a trading range.
o The overnight bull trend makes it is better to look to buy pullbacks.
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o That 30-pip selloff will make day traders willing to sell reversals down from the high, if there are strong sell setups.
o The bulls want today to close above yesterday’s high. They would like today to close near the high of the day, which would increase the chance of higher prices on Monday.
o Bulls would like today to close above the open of the week, but that is probably too far above, given that there was a 30-pip selloff a few hours ago.
o The bears want a reversal down, and for today to close on its low. Today would then be a sell signal bar on the daily chart. They currently have only a 20% chance of success.
o At a minimum, the bears want today to close below yesterday’s high. That would make Monday more likely to be sideways than up.
/h2
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