EUR/USD Tight Trading Range
Al Brooks | Nov 02, 2017 09:26AM ET
The EUR/USD daily Forex chart is in a 5 day tight trading range after last week’s break below a 4 month trading range. The bulls have a micro double bottom, and a big High 2 bull flag with the October 6 low. Today’s rally creates a potential micro double top bear flag. Since last week’s selloff was very strong, the odds favor at least slightly lower prices over the next couple of weeks.
As I have been saying, the daily chart is forming a tight trading range with both a small reversal pattern and a small bear flag. Since last week’s selloff was unusually strong, the odds favor at least slightly lower prices over the next couple of weeks.
However, when a big breakout immediately stalls just below the breakout point, the odds of a measured move down are less. Furthermore, the weekly chart has pulled back to its 20 week exponential moving average in a strong bull trend. This will likely limit the extent of the selling. Since the bear channel on the weekly chart is tight, the first reversal up will probably be minor. This means that the best the bulls will probably get over the next few weeks is a tight trading range on the weekly chart.
That would be a trading range on the daily chart, which now has to discover the top and bottom of that range. Consequently, while the bear breakout has been strong and the odds favor at least a little more selling over the next couple of weeks, the odds are against a sustained move up or down.
h3 Strong bull trend on the weekly chart/h3Since the weekly chart has not touched the 20 week exponential moving average in more than 20 weeks, last week’s pullback to the moving average will attract buyers. They have been so eager to buy that they have been buying above the average price for months. They are happy to finally get to buy at the average price.
Last week was a big bear bar on the weekly chart. The bears need another bear bar this week to increase their chances of a measured move down below the 4 month range. Yet, this week so far is a bull. That is disappointing follow-through for the bears. It therefore makes the 2 month selloff more likely just a bear leg in a bull flag and not the start of a bear trend.
Since the 9 week selloff is in a tight bear channel, the chart will probably have to go mostly sideways for several weeks before the bulls will be able to get a test back up to the September high. Furthermore, last week’s bear bar was big enough so that the bears might get 1 or 2 more brief legs down. However, the odds still favor a continuation of the 4 month range rather than a reversal into a bear trend.
h3 Overnight EUR/USD Forex trading/h3
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The 5 minute EUR/USD Forex chart has been in a tight trading range for 5 days. Day traders have therefore been scalping. There is no sign of a breakout. In addition, the 1st breakout of a tight range usually does not get very far. As a result, unless there is a strong breakout up or down, day traders will continue to scalp today.
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