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EURUSD Breakout Test or Stalling?

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Market Overview: EURUSD Forex

The weekly chart formed consecutive doji(s) and traders are wondering if the market is forming a EURUSD breakout test or stalling around the lower third of the trading range. The bulls need to create consecutive bull bars closing near their highs and trading above the 20-week EMA to indicate they are back in control. The bears want to get at least another leg down, completing the wedge pattern with the first two legs being February 14 and April 16. At the very least, they want a retest of the April 16 low. 

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Breakout Test or Stalling near TR Low? EURUSD Breakout Test or Stalling
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull doji with a long tail above.
  • Last week, we said that the market may still be in the sideways to down bear leg. Traders will see if the bears can get another leg lower or will the market continue to stall around the current levels (lower third of the large trading range).
  • The market traded sideways to up for most of the week, but traded lower on Friday, closing the week with a long tail above.
  • The bears got a breakout below the triangle pattern and the smaller 22-week trading range but were not able to get strong follow-through selling.
  • They hope that the last two weeks were simply a pullback and a breakout test.
  • They want to get at least another leg down, completing the wedge pattern with the first two legs being February 14 and April 16. At the very least, they want a retest of the April 16 low.
  • If the market trades higher, the bears want the market to stall around the breakout point or the 20-week EMA.
  • The bulls see the current move simply as a two-legged pullback (which started on Dec 28) and a bear leg within a trading range.
  • They want a reversal from around the lower third of the large trading range from a higher low major trend reversal, a larger wedge bull flag (Mar 15, Oct 3, and Apr 16) and a wedge in the third leg down (Dec 8, Feb 14, and Apr 16).
  • While this week was a follow-through bull doji, the small bull body and the long tail above indicate that the bulls are not yet as strong as they hope to be.
  • They need to create consecutive bull bars closing near their highs and trading above the 20-week EMA to indicate they are back in control.
  • Since this week’s candlestick is a bull doji with a long tail above, it is a buy signal bar albeit weak.
  • Traders are wondering if the two bull doji(s) are enough to reverse the big bear breakout bar.
  • If the bulls get more follow-through buying, it could swing the odds in favor of a failed breakout of the triangle pattern and the smaller 22-week trading range.
  • Traders may want to see at least a small double bottom (with April 16) before they would be more willing to buy aggressively.
  • For now, the market may still be in the sideways to down bear leg.
  • Traders will see if the bears can get another leg lower or will the market continue to stall around the current levels (lower third of the large trading range).
  • The EURUSD is in a 75-week trading range. (Trading range high: July 2023, Trading range low: Oct 2023). 
  • The lower third area of the large trading range could be a buy zone for trading range traders.
  • 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.

The Daily EURUSD chart

EURUSD Daily: Bear Flag or Failed Breakout?
  • The EURUSD traded sideways to up for most of the week. Friday traded higher but reversed into an outside bear bar closing below the 20-day EMA.
  • Last week, we said that traders would see if the bears can create another leg down after the current pullback (bounce).
  • The bulls hope that the breakout from the triangle and the smaller trading range will fail.
  • They hope that the current move will form a higher low major trend reversal and a wedge bull flag (Dec 8, Feb 14, and Apr 16).
  • They want a reversal from around the lower third of the large trading range.
  • They will need to create a few strong consecutive bull bars trading back above the 20-day EMA to indicate that they are back in control.
  • If the market trades lower, they want a small double bottom or a higher low major trend reversal with the April 16 low.
  • The bears got a breakout below the smaller trading range and the triangle pattern.
  • However, the follow-through selling was not as strong as the bears hoped it would be.
  • They see the current move simply as a pullback and a breakout test.
  • They want the pullback to stall around the 20-day EMA area and form another leg down, completing the wedge pattern with the first two legs being April 2 and April 16.
  • For now, traders will see if the bears can create another leg down after the current pullback (bounce).
  • The market is currently trading around the lower third of the large trading range which could be the buy zone of trading range traders.
  • 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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