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EURUSD Weak High 2 Setup

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Market Overview: EURUSD Forex

The weekly chart formed a EURUSD weak High 2 setup because it is following a tight bear channel. The bulls want a reversal from a double bottom bull flag (Dec 8 and Feb 6). The bears want a retest of the Feb 6 low followed by a breakout below.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: H2 Setup but Tight Bear Channel, EURUSD Weak High 2 Setup
  • This week’s candlestick on the weekly EURUSD Forex chart was a doji bar with a long tail below.
  • Last week, we said that the odds slightly favor the market to trade sideways to down and traders will see if the bears can get follow-through selling.
  • This week traded lower early in the week but reversed most of the move.
  • The bulls want a retest of the December and July highs followed by a breakout above.
  • They see the current pullback as minor and want the 20-week EMA or the bull trend line to act as support.
  • The bulls want a reversal from a double bottom bull flag (Dec 8 and Feb 6). They want to trigger the High 2 bull setup by trading above this week’s high.
  • The bulls will need to create follow-through buying, trading above the 20-week EMA to increase the odds of the bull leg resuming.
  • The bears see the rally from October to December as a retest of the prior leg’s extreme high (Jul 18).
  • They 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).
  • The move down consists of a 7-bar bear microchannel. Odds slightly favor sellers above the first pullback. 
  • Since this week’s candlestick is a doji bar, it is a neutral signal bar for next week.
  • Because the move down has lasted for a while, we may see a minor pullback (bounce) followed by at least a small second leg sideways to down to retest the current leg extreme (Feb 6) after that. 
  • Traders will see the strength of the pullback (bounce), if any. If it is weak and lacks sustained follow-through buying, the odds of another leg down will increase.
  • The EURUSD is in a 63-week trading range. (Trading range high: July 2023, Trading range low: Oct 2023). 
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until there is a breakout with follow-through selling/buying.

The Daily EURUSD chart

EURUSD Daily: DB Bottom Bull Flag, Tight Bear Channel
  • The EURUSD traded sideways for the week. The market traded lower earlier in the week but lacked follow-through selling and reversed most of the move.
  • Previously, we said that odds slightly favor the current pullback to be minor even if it lasts another couple of weeks. If the bears can create sustained follow-through selling below the 20-day EMA, it could swing the odds in favor of the bear leg beginning.
  • So far, the bears were able to able to create follow-through selling below the 20-day EMA, albeit not yet very strong (a lot of overlapping price action).
  • The bears got a reversal down from a wedge pattern (Nov 6, Nov 29, and Dec 28) and a lower high major trend reversal (with the July high).
  • They see the rally from October simply as a bull leg within a trading range.
  • They got the third leg down this week testing the December 8 low but lacked follow-through selling.
  • If the market trades higher, the bears want the EURUSD to stall around the 20-day EMA or the bear trend line area.
  • They want at least a small second leg sideways to down to retest the February 6 low followed by a breakout below the December 8 low.
  • The bulls see the pullback as forming a double bottom bull flag (Dec 8 and Feb 6).
  • They want a reversal from a wedge bull flag (Jan 5, Jan 26, and Feb 6). 
  • They will need to create a few strong bull bars closing far above the 20-day EMA and the bear trend line to increase the odds of the bull leg resuming.
  • For now, the move down is strong enough to favor at least a small second leg sideways to down after a pullback.
  • Traders will see if the bulls can create sustained follow-through buying. If the buying remains sideways and weak, the odds of a retest of the February 6 low and a breakout below it will increase.

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