EURUSD Failed Breakout?

Market Overview: EURUSD Forex

The market traded higher but reversed to close as a bear bar forming a possible EURUSD Failed Breakout. The bears will need to create follow-through selling to increase the odds of a deeper pullback. The bulls hope that the move down is simply a breakout test of the April high (breakout point)

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing near its low.
• Last week, we said that odds slightly favor the EURUSD to trade at least a little higher and traders will see if the bulls can create follow-through buying or will the market trade slightly higher but close with a long tail above or with a bear body.
• This week traded slightly higher but reversed to close as a bear bar.
• The bulls got the third leg up forming a wedge pattern (Feb 2, Apr 26, and Jul 18).
• Next, they want a strong leg-up lasting many weeks like the one which started in November 2022.
• The targets for the bulls are the Jan/Feb 2022 highs and a measured move up using the height of the prior 6 month’s trading range which will take them to around the October 2021 high.
• However, they were not able to create a follow-through bull bar this week to confirm the breakout above the April high. This is not usually how a strong breakout begins.
• They hope that this week’s pullback was simply a breakout test of the April high (breakout point).
• The bears hope to get a reversal from a failed breakout above April, a wedge top (Feb 2, Apr 26, and Jul 18) and a trend channel line overshoot.
• They need to create follow-through selling next week to increase the odds of a reversal down.
• Since this week’s candlestick was a bear bar closing near its low, it is a sell signal bar.
• Because of the lack of follow-through buying this week, odds slightly favor the market to trade at least a little lower.
• Traders will see if the bears can create follow-through selling or will next week trade slightly lower but close as a doji or with a bull body and a long tail below.
• If the bears get strong follow-through selling, the odds of a deeper pullback will increase.

The Daily EURUSD chart

• The EURUSD traded slightly higher earlier in the week but reversed to close near the April high (breakout point).
• Last week, we said that the first pullback would likely be minor, and the odds slightly favor at least a small second leg sideways to up.
• The bulls got a strong breakout from a wedge bull flag (Jun 23, Jun 30, and Jul 6) and a larger second leg sideways to up completing the wedge pattern with the first two legs being February 2 and April 26. 
• They want the breakout above April to be the start of a new leg lasting many weeks, like the one which started in November 2022. They want a channel up after a small pullback.
• The next targets for the bulls are the Jan/Feb 2022 highs and a measured move using the height of the January-June trading range which take them to around October 2021 high.
• The move up is strong enough for traders to expect at least a small second leg sideways to up after a slightly larger pullback.
• The bears hope to get a failed breakout above the April high. 
• They want a reversal down from a trend channel line overshoot and a wedge top (Feb 2, Apr 26, and Jul 18).
• They will need to continue creating consecutive bear bars closing near their lows to increase the odds of a failed breakout.
• For now, odds slightly favor the market to still be in always in long.
• However, the EURUSD may still trade sideways to down for a while more, probably testing the 20-day exponential moving average to work off the recent overbought conditions.

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