The daily EUR/USD chart is in the middle of a 5-month trading range. There is therefore both a buy and a sell setup. The bulls have a double bottom higher low major trend reversal. However, the July 9 buy signal bar was weak, as has been the follow-through after the one strong bull day.
If today is a bear day, it will be a sell signal bar for tomorrow. Today will be a micro double top with Thursday’s high. Furthermore, the 3-day rally will be the right shoulder in a head and shoulders top bear flag. June 12 would be the left shoulder.
The bears want a strong break below the May 23 low. If they get it, traders will conclude that the yearlong bear channel is still in effect. However, the bulls bought every new low over the past year. Consequently, they will probably buy around the May low as well.
On the weekly chart, last week was a small buy signal bar. When a buy signal bar is small and the buy signal triggers, there is a 50% chance of a quick reversal down to below the low of the bar and then a 2nd reversal up. The weekly buy signal will trigger if this week goes above last week’s high. Unless the bulls get a strong rally above that high, traders will watch for a reversal down to below last week’s low.
Overnight EUR/USD Trading
The EUR/USD’s 5-minute chart has been in a 20-pip range overnight. By going above Friday’s high, today triggered a minor buy signal on the daily chart. However, the rally so far has failed to trigger the weekly buy signal by going above last week’s high.
Today is the 3rd day in a tight trading range. There is no sign that today will be different.
Traders are deciding between a test of the May low or the June high. The chart might have to do both. If so, it will probably test down 1st. This is because the 3 day rally has been weak and it followed a 3-week tight bear channel. Therefore, many bulls want another test of the June low. In addition, the bulls had their best rally in over a year in June. They therefore will probably get at least one more leg up to test the March or January highs.
By Al Brooks
Jul 15, 2019 11:00AM ET
Source: Investing.com