The EUR/USD forex market on the daily chart rallied for 4 days, and the rally is an adequate test of the top of last week’s strong rally. The chart is back to neutral after being bullish for a couple weeks. Traders are now deciding it the bulls will get a successful breakout above the September 10 high, or if the double top will lead to a reversal down. The shrinking bodies over the past 4 days is a sign of a loss of momentum as the rally tests the September 10 high a 2nd time. That increases the chance of at least a small test down over the next couple days.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market rallied strongly early overnight but then reversed back down to open of the session. The reversal down has been strong enough so that traders do not expect a rally back up to the high of the day.
The bears want the day to close either around the open or the low of the day. With the strong reversal down on the 5-minute chart and the shrinking bodies on the daily chart, today will probably not be a bull trend day. That means it is likely to be either a bear trend day or a trading range day.
While the selloff of the past 5 hours has been good for the bears, the EUR/USD fell only 40 pips. That is not a strong bear trend. Consequently, traders are not looking for a big bear day at the moment. That leaves a trading range day as the most likely outcome.
So far, today’s high is below yesterday’s high, today’s low is above yesterday’s low, and the EUR/USD is trading around the open of the day. This behavior is consistent with a trading range day. However, the bounces over the past 5 hours have all been less than 15 pips. Therefore, day traders are currently only looking to sell. The bear swing has not yet ended.
But if the 5-minute chart starts to go sideways for an hour or has a 20-pip bounce, day traders will also look to buy again. This is likely since yesterday was a small, sideways day, and today so far is even a smaller day.