EUR/USD Trading Strategies: 01_14_20
Al Brooks | Jan 14, 2020 10:54AM ET
The daily chart of the EUR/USD Forex market has been in a bear channel for 2 weeks. It has also been in a trading range for 6 months with most legs up and down lasting 2 – 3 weeks. There is currently no reason to expect this to change.
Most reversals come at support or resistance. The December 6 and December 20 lows are obvious support. Traders expect this selloff to continue down to that area over the next week. They will then watch for a sign of a reversal up or a continuation down to the next support at the November 29 low.
h3 Overnight EUR/USD Trading/h3The 5 minute chart of the EUR/USD Forex market sold off 40 pips over the past 6 hours It is now below yesterday’s low. The bears see yesterday as a Low 1 sell signal bar on the daily chart in a 2 week bear channel.
But it has a bull body and it was the 2nd consecutive bull bar. This is a weak sell signal. Consequently, there might be more buyers than sellers below its low.
The overnight selloff has been in a tight bear channel. That means the bulls have not yet been buying. However, because yesterday was a weak sell signal, the odds are against today continuing much lower. Therefore, the bears will probably soon switch to selling 20 pip rallies from selling at the market.
Once the bulls start to see 20 pip bounces, they will begin to buy tests of the day’s low. That should result in a trading range forming today around yesterday’s low.
Can today reverse up strongly from below yesterday’s low? Unlikely. The bars on the 5 minute chart are small and there are magnets below on the daily chart.
What about a continued bear trend day? While it is possible, the weak sell signal on the daily chart will make traders want to sell rallies. That reduces the chances of a big bear trend day. The bear trend will probably evolve into a 20 – 30 pip tall trading range for the rest of the day, and close around yesterday’s low.
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