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EURUSD Two-Legged Pullback

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Market Overview: EURUSD Forex

The weekly chart formed a EURUSD two-legged pullback, closing above the 20-week EMA. The bulls need to create a follow-through bull bar to increase the odds of the bull leg resuming. The bears want the 20-week EMA to act as resistance and a reversal from a lower high major trend reversal.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Close above 20-week EMA, Bulls Need FT, EURUSD Two-Legged Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull bar closing in its upper half with a prominent tail above.
  • Last week, we said that the market may still be in the sideways to up pullback phase.
  • This week, the bulls got follow-through buying closing above the 20-week EMA.
  • They want a retest of the December high followed by a breakout above.
  • They see the recent pullback (from Dec to Feb) as minor and want the 20-week EMA or the bull trend line to act as support. So far this is the case.
  • They got a reversal from a double bottom bull flag (Dec 8 and Feb 14). 
  • They hope to get at least another leg up completing the wedge with the first two legs being February 22 and March 8.
  • They will need to create consecutive bull bars closing near their highs, trading above the 20-week EMA to increase the odds of the bull leg resuming.
  • The bears got a reversal from a wedge bear flag (Nov 3, Nov 29, and Dec 28) and a lower high major trend reversal.
  • They created a tight bear channel closing below the 20-week EMA. They want a retest of the trading range low (Oct 2023 low).
  • They see the current pullback (bounce) as forming a lower high major trend reversal (against Dec high).
  • They want the 20-week EMA to act as resistance and the market to reverse back below it.
  • If the market trades higher, they want a reversal from a large double top bear flag with the December high.
  • Since this week is a bull bar closing in its upper half, it is a buy signal bar for next week.
  • Traders will see if the bulls can create another follow-through bull bar above the 20-week EMA.
  • So far, while the pullback is not yet very strong (prominent tails above and doji), it is in a small tight bull channel, which means persistent buying.
  • The EURUSD is in a 67-week trading range. (Trading range high: July 2023, Trading range low: Oct 2023). 
  • The EURUSD is in a smaller trading range in the last 17 weeks. 
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until there is a breakout with follow-through selling/buying.
  • Poor follow-through and reversals are hallmarks of a trading range.
  • For now, the bulls need to create a follow-through bull bar following this week’s close above the 20-week EMA to increase the odds of the bull leg resuming.
  • Traders will see if the bulls can create follow-through buying or will the bears be able to create a reversal back below the 20-week EMA instead.
  • If the bulls can create a few strong consecutive bull bars closing above the 20-week EMA, it can swing the odds in favor of the bull leg resuming.

The Daily EURUSD chart

EURUSD Daily: FT Buying above 20-day EMA
  • The EURUSD traded sideways to up for the week above the 20-day EMA.
  • Previously, we said that the market may still be in the sideways-to-up pullback phase and favor at least a small second leg up after a small pullback.
  • This week, the bulls managed to create a second leg up after a small pullback.
  • The bulls see the move down (to Feb low) as forming a double bottom bull flag (Dec 8 and Feb 14) and a wedge bull flag (Jan 5, Feb 6, and Feb 14). 
  • They want at least a TBTL (Ten Bars, Two Legs) pullback, which is currently underway.
  • If the market trades lower, they want at least another leg up, completing the wedge pattern with the first two legs being February 22 and March 8.
  • They want the 20-day EMA or the bull trend line to act as support.
  • The move up is strong enough to favor at least a small second leg sideways to up after another small pullback.
  • Previously, the bears were able to able to create sideways to down trading below the 20-day EMA (from Dec to Feb), albeit not very strong (a lot of overlapping price action).
  • They got the third leg down (therefore a wedge, Jan 5, Feb 6, and Feb 14) breaking below the December 8 low but lacked follow-through selling.
  • They see the current move simply as a two-legged pullback and a buy vacuum test of the small trading range high area.
  • They want a reversal from a lower high major trend reversal (against Dec high), a double top bear flag (Jan 11 and Mar 8) and around the trading range high area.
  • At a minimum, they want a small retest of the February 14 low (even if it only ends up as a higher low).
  • If the market trades higher, they want it to stall around the December high, forming a larger double top bear flag.
  • So far, the pullback is strong enough to slightly favor at least a small sideways to up leg after a small pullback.
  • For now, the market may still be in the sideways to up pullback phase.
  • However, it is also trading around the upper third of the trading range which is the sell zone of trading range traders.
  • Traders will see if the bulls can create more buying pressure (consecutive bull bars closing near their highs).
  • Or will more selling pressure start to develop around the trading range high area instead?
  • The EURUSD is in a smaller trading range in the last 17 weeks. 
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until there is a breakout with follow-through selling/buying.
  • Poor follow-through and reversals are hallmarks of a trading range.

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