EURUSD pullback after breakout below March 4 low

Market Overview: EURUSD Forex

EURUSD pullback after breakout and trading sideways after breaking below March 4 low. It may continue to trade sideways for another week or two. If there is a breakout, odds slightly favor a downside breakout more. Bulls need to create consecutive big bull bars trading far above April 21 high to convince traders that a reversal higher may be underway.

EURUSD Forex market

The Weekly EURUSD chart

• This week’s candlestick on the weekly EURUSD Forex chart was a bear doji bar with a long tail above and a prominent tail below. It traded above last week’s high but reversed to close around the lower half of the range.
• Last week, we said that odds slightly favor sideways to down for next week. Traders will be monitoring whether the bears get a 3^rd consecutive bear bar and reach the measured move around 1.072 or the bulls manage to create a strong reversal bar instead.
• The bears got consecutive closes below March 7 low which confirmed the breakout. However, the prominent tail below the last two week’s candlesticks indicates that the bears are not as strong as they could have been.
• The bears want a resumption of the bear trend and a test of the March 2020 low followed by a strong breakout below. If they get that, the next target for the bears is the bottom of the 7-year trading range – the January 2017 low.
• The bulls hope that the 4-month trading range (Nov 2021 to Feb 2022) is the final flag of the bear leg and want the breakout below to reverse higher from around the March 2020 low. The trading range came late in the bear trend, and that makes it a potential final bear flag.
• The bulls want a reversal higher from a double bottom with March 4 Low and a lower low major trend reversal. However, since this week was a bear doji with a long tail above and it followed 2 big bear bars, it is a weak buy signal bar for a strong reversal up.
• The bulls have a micro double bottom (March 4 and April 14), but they need to create strong consecutive bull bars closing near their highs to convince traders that a reversal could be underway.
• Al has said that the market has been in a trading range for seven years. It is now near the bottom of the range. Reversals are more likely than breakouts. Therefore, as strong as the selloff has been, it is still more likely a bear leg in the seven-year trading range than a resumption of the 15-year bear trend.
• If the bears can get a couple of closes below the March 2020 low, the selloff should continue down to 2017 low, which is the bottom of the 15-year bear trend. A couple of closes below that low would probably be the start of a measured move down based on the height of the seven-year trading range.
• The odds of a reversal from the bottom of the trading range around the March 2020 low or around the January 2017 low are slightly higher than a strong breakout below 2017 low and a measured move down.
• On a side note: The French election this year may be a catalyst for a big move for the Euro, especially if the current President Emmanuel Macron loses to Le Pen who favors France leaving the EU (Frexit – like Brexit) and NATO.
• Since this week was a bear doji, and it was overlapping with last week’s candlestick, we may continue to see trading range price action for another week or two.
• If there is a breakout, odds slightly favor a downside breakout.
• Traders will be monitoring whether the bears get a 4^th consecutive bear bar and reach the measured move around 1.072 or the bulls manage to create a strong reversal bar instead.

The Daily EURUSD chart

• The EURUSD broke below the ioi (inside-outside-inside) pattern on Monday, but there was no follow-through selling on Tuesday. The EURUSD then reversed higher to test the April 14 high but reversed lower from a double top bear flag into Friday. Friday was a bear bar with a prominent tail below which indicates that the bears are not as strong as they could have been.
• Last week, we said that odds favor at least a small second leg sideways to down after a slightly larger pullback (bounce).
• This week’s pullback (bounce) midweek was the slightly larger pullback and the sell-off into Friday was the second leg sideways to down.
• The bears have reached the 700-pip measured move lower based on the height of the yearlong trading range (August 2020 to August 2021) around 1.0855 during the spike down to March 4 low. 
• They have not yet reached the 400-pip measured move based on the height of the 4-month trading range (Nov 2021 to Feb 2022) which will take them to around 1.072 which is very near to the March 2020 low.
• Another measured move for the bears is the height of the 3-week trading range (March 7 to March 31) which will take them to around 1.4268 which is near the 2017 low.
• The sell-off in the last 3-weeks was in a tight bear channel. Odds still slightly favor any reversal to be minor unless the bulls start creating consecutive big bull bars trading far above April 21 high.
• Bears want a strong break below April 19 low and follow-through selling to reach measured move targets below.
• The bulls have not been able to create strong consecutive bull bars with follow-through buying since the sell-off on March 31^st. 
• While there is a micro double bottom (April 14 and April 19), the move down is in a tight bear channel. That represents persistent selling and strong bears.
• The bulls will need at least a strong bull reversal bar with follow-through buying, or create consecutive big bull bars closing near their highs trading far above April 21 high to convince traders that a reversal higher may be underway.
• The bulls hope for a failed breakout below March 4 low and a strong reversal higher from a lower low major trend reversal.
• As strong as the sell-off has been since January 2021, it is still more likely a bear leg in the 7-year trading range than a resumption of the 15-year bear trend.
• Since Friday was a bear bar, it is not a strong buy signal bar for a strong reversal up on Monday.
• For now, we may see another week or two of trading range price action. 
• If there is a breakout, odds slightly favor a downside breakout.

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