On the weekly chart, last week EUR/USD had its third consecutive big bull bar closing near its high. That increases the chance of higher prices this week.
On daily chart, Friday closed above Apr. 20 high, which was the top of a small parabolic wedge.
There are at least 2 ways that the Small Pullback Bull Trend can be seen as a wedge, which should attract some profit taking.
If the bulls get a bull day today, especially a big bull day closing on its high, traders will expect this rally to continue up to the Feb. 25 high. Even a small bull body increases the chance that the EUR/USD will go higher.
If the bears get a bear reversal bar closing on its low today, traders will conclude that Friday’s breakout failed. They will then look for a reversal down for a couple weeks.
Since the April rally is in a 9-month trading range, it is more likely to pull back soon than to break above the Jan. 6 high.
Overnight EUR/USD Forex trading on 5-minute chart
Rallied above last week’s high (Friday’s high) and reversed down.
The bears do not need the selloff to continue, because today is already a good bear reversal bar on the daily chart.
Bears need the day to close near its low, which is where the EUR/USD currently is. If it does, today will be a good sell signal bar, for a failed breakout into the December/February upper trading range.
Bulls want a bull body today. That means a close above the open of the day.
A bull bar on the daily chart would be a bull follow-through bar after Friday’s bull breakout.
A bull follow-through bar after a bull breakout increases the chance that the breakout will be successful. It would be a possible measuring gap for a test of the Feb. 25 high.
Even though today so far is a bear reversal day, the selloff was not particularly strong.
Also, the bulls have been strong for 3 weeks.
Unless the overnight bear trend accelerates down, the bulls will look to buy a reversal up.
The bulls do not need today to close on its high. They only need a close above the open. The open is only 15 pips above the current price.
Since neither the bulls nor the bears need a big move from here, there is an increased chance that the EUR/USD will be in a trading range for the remainder of the session.
Unless there is a series of strong trend bars up or down, day traders will look for reversals to scalp.