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EURUSD Tested the 20-Week EMA

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Market Overview: EURUSD Forex

The weekly chart: the EURUSD tested the 20-week EMA in a two-legged pullback. The bears 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 want the 20-week EMA to act as support, followed by a reversal from a double bottom bull flag (Dec 8 and Jan 17).

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Test 20-Week EMA, Double Bottom Bull Flag? EURUSD Tested the 20-Week EMA
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with a long tail below.
  • Last week, we said that odds slightly favor the pullback to be minor even if it lasts a couple more weeks and the market is still in the bull leg phase.
  • The bulls 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 September 2022 to July 2023 rally).
  • They see the current pullback as minor even if it lasts a few weeks. We are in the third week of the pullback.
  • They want the 20-week EMA to act as support, followed by a reversal from a double bottom bull flag (Dec 8 and Jan 17).
  • This week tested the 20-week EMA followed by a bounce to close slightly below the middle of the candlestick.
  • The bears see the rally since October as a retest of the prior leg’s extreme high (Jul 18).
  • They want a reversal from a wedge bear flag (Nov 3, Nov 29, and Dec 28) and a lower high major trend reversal.
  • 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. 
  • Since this week’s candlestick is a bear bar with a long tail below, it is a weaker sell signal bar for next week.
  • Traders will see if the bulls can trigger the High 2 buy setup and close with a strong entry bar.
  • For now, odds slightly favor the pullback to be minor even if it lasts a couple more weeks and the market to still be in the bull leg phase. 
  • The EURUSD is in a 60-week trading range. 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: 2nd Leg Down, Double Bottom Bull Flag?
  • The EURUSD broke below the bear flag on Tuesday followed by sideways trading for the rest of the week. Friday was an inside bull bar closing near its high.
  • Last week, we said that the odds slightly favor the current pullback to be minor even if it lasts another couple of weeks. If the bears can create consecutive bear bars closing near their lows and trading below the 20-day EMA, it could swing the odds in favor of the bear leg beginning.
  • This week broke below the 20-week EMA and the bear trend line, but the follow-through is not yet as strong as the bears hoped it would be.
  • The bears got a reversal down from a wedge pattern near the upper third of the trading range (Nov 6, Nov 29, and Dec 28) and a higher high major trend reversal (Nov 29).
  • They see the rally from October simply as a bull leg within a trading range and want a reversal from a large lower high major trend reversal (with the July high).
  • This week., they got a second leg down from a small double top bear flag (Jan 5 and Jan 11).
  • They will need to create consecutive bear bars closing near their lows trading far below the 20-day EMA and the bull trend line to increase the odds of the bear leg beginning.
  • The bulls see the pullback as forming a double bottom bull flag (Dec 8 and Jan 17) and a higher low.
  • If the market trades lower after a pullback, they want a reversal from a wedge bull flag with the first two legs being January 5 and January 17.
  • They want a resumption higher and hope to get a breakout above the 60-week trading range followed by a big second leg sideways to up lasting many weeks (with the first leg being September 2022 to July 2023 rally).
  • They will need to create a few strong bull bars closing back above the 20-day EMA to increase the odds of the bull leg resuming.
  • For now, odds slightly favor the current pullback to be minor even if it lasts another couple of weeks. This remains true.
  • However, 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. 

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