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EURUSD Second Leg Up?

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Market Overview: EURUSD Forex

The bulls hope that the market is forming a EURUSD second leg up from a higher low major trend reversal. They want a retest and breakout above the trading range high. The bears want at least a small second leg sideways to down to retest the December 8 low.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Second Leg Up, EURUSD Weekly: No Bear FT below 20-Week EMA
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull bar with a long tail above.
  • Last week, we said that the odds slightly favor the EURUSD to still be in the sideways to down minor pullback phase. 
  • This week reversed higher and tested near the November high but closed slightly above the middle of its range.
  • Previously, the bears got the first pair of consecutive bear bars closing slightly below the 20-week EMA. 
  • However, they were not able to get follow-through selling below the 20-week EMA.
  • They see the rally in October and November simply as a deep pullback and want a second leg down to retest the October low.
  • They want a reversal from a wedge bear flag (Oct 12, Nov 3, and Nov 29), a lower high major trend reversal and a small double top (Nov 29 and Dec 14).
  • They hope that this week was simply a retest of the prior leg’s extreme high (Nov 29) and want at least a small second leg sideways down (a two-legged pullback).
  • They need to create a few strong consecutive bear bars closing below the 20-week EMA to increase the odds of retesting the trading range low.
  • The bulls got a reversal after a test of the trading range low (Jan low).
  • They want a retest of the July high followed by a continuation higher in the form of a large second leg up (with the first leg being the September 2022 to July 2023 rally).
  • They want a reversal from a higher low major trend reversal and the 20-week EMA to act as support. So far this is the case.
  • They will need to create follow-through buying trading above the November 29 high to increase the odds of higher prices.
  • Since this week’s candlestick is a bull bar closing above the middle of its range with a long tail above, it is a buy signal bar for next week albeit weaker.
  • For now, odds continue to slightly favor any pullback to be minor and for the market to still be Always In Long.
  • Traders will see if the bulls can create a follow-through bull bar next week, or will the market trade lower instead, forming a two-legged sideways to down minor pullback phase?

The Daily EURUSD chart

EURUSD Daily: Reversal from HL MTR or Second Leg Down?
  • The EURUSD traded higher for the week, followed by a pullback on Friday, closing as a big inside bear bar near its low.
  • Last week, we said that while the pullback can last a couple of weeks more, odds slightly favor the market to still be Always In Long. Traders will see if the bears can create follow-through selling early next week or will the market trade higher, followed by a small second leg sideways to down to retest the December 8 low after that.
  • Previously, the bears got a reversal down from a wedge pattern near the upper third of the trading range (Nov 14, Nov 21, and Nov 29), a lower high major trend reversal and a double top bear flag (Aug 10 and Nov 29).
  • They hope that the larger second leg sideways to down to retest October low is now underway.
  • They see the strong rally this week simply as a retest of the November 29 high and want a reversal from a double top major trend reversal (Nov 29 and Dec 14).
  • They will need to create a breakout below the bear inside bar with follow-through selling below the 20-day EMA next week to increase the odds of a deeper pullback.
  • The bulls got a reversal from a parabolic wedge (Aug 25, Sept 14, and Oct 3) and a large double bottom with the January/March lows.
  • The bull leg retested the upper third of the trading range, which is the selling zone for trading range traders.
  • They see the pullback to the December 8 low simply as a 50% pullback. They want a reversal from a higher low major trend reversal (Dec 8)
  • If the market trades lower next week, they want a reversal from a double bottom bull flag (with Dec 8) and the 20-day EMA to act as support.
  • Since Friday was an inside bear bar closing near its low, the EURUSD is in breakout mode.
  • Odds slightly favor a breakout below the inside bar first. Traders will see if the bears can create sustained follow-through selling.
  • For now, while the pullback can last a couple of weeks more, odds slightly favor the market to still be Always In Long.

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