EUR/USD In Tight Bull Channel, Sideways Movement Likely
Al Brooks | May 04, 2023 09:28AM ET
- The EUR/USD formed an upside breakout following yesterday’s FOMC release.
- While the bulls hope the rally will continue and break far above the April high, the trading range will likely continue.
- Traders will fade strong bull bars betting that gaps close. They will also fade strong bear trend bars.
- I have said several times that the odds are the bull channel that began on March 24th will likely convert into a trading range and test prior lower highs. However, the bears need to get closes below the moving average (blue line), or else traders will assume every test of the moving average will fail.
- At the moment, the bears are trying to form a truncated wedge with April 14th, April 27th, and today’s high. A truncated wedge means that the last high forms a lower high instead of a higher high. This is due to sellers overwhelming buyers at the prior high (April 26th).
- Overall, traders should expect more sideways trading. The bears want today to close on its lower and reverse yesterday’s rally. This would set up a potential stop entry short for a test below the moving average.
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