Al Brooks | Dec 06, 2021 09:52AM ET
EUR/USD has been in a trading range for 3 weeks so it's now in Breakout Mode. Today, so far, is turning into a small bear inside candlestick, which is a continuation of the trading range.
Thursday triggered a Low 2 and a double top sell signal (Nov. 10/Nov. 30), but there has not been follow-through selling. There is no sense that the price is terribly wrong. Traders are deciding if there will be a higher low reversal and a measured move up to the Oct. 27 high, or a break below the November low, which is the neckline of the double top, and then a measured move down.
Friday was a bull doji bar, which is a weak buy signal bar for a High 1 in a Small Pullback Bull Trend.
The bulls want a measured move up to the Nov. 9 top of the most recent sell climax. The probability is about 50% for each. Also, there is a 50% chance that the 1st breakout up or down will fail.
It is important to remember that the pair is in the middle of a 7-year trading range. Also, the selloff was climactic. That makes it likely to go sideways to up for a couple months soon, whether or not it ultimately breaks below last year’s low and the bottom of the 7-year range.
On the weekly chart, last week triggered a buy signal for a failed breakout below a bear channel. Last week was also a doji bar with a small bull body. This is not yet a clear reversal up.
As I said, there will probably be a trading range lasting a couple months starting soon. The past 2 weeks had prominent tails, which is often an early sign of a trading range. There might be another brief leg down before the bear trend transitions into a trading range. Less likely, the bear trend will continue down in a tight bear channel to below last year’s low.
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