Market Overview: EURUSD Forex
The market traded higher but reversed to close as a bear bar forming a possible EURUSD Failed Breakout. The bears will need to create follow-through selling to increase the odds of a deeper pullback. The bulls hope that the move down is simply a breakout test of the April high (breakout point)
EURUSD Forex market
The Weekly EURUSD chart
- This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing near its low.
- Last week, we said that odds slightly favor the EURUSD to trade at least a little higher and traders will see if the bulls can create follow-through buying or will the market trade slightly higher but close with a long tail above or with a bear body.
- This week traded slightly higher but reversed to close as a bear bar.
- The bulls got the third leg up forming a wedge pattern (Feb 2, Apr 26, and Jul 18).
- Next, they want a strong leg-up lasting many weeks like the one which started in November 2022.
- The targets for the bulls are the Jan/Feb 2022 highs and a measured move up using the height of the prior 6 month’s trading range which will take them to around the October 2021 high.
- However, they were not able to create a follow-through bull bar this week to confirm the breakout above the April high. This is not usually how a strong breakout begins.
- They hope that this week’s pullback was simply a breakout test of the April high (breakout point).
- The bears hope to get a reversal from a failed breakout above April, a wedge top (Feb 2, Apr 26, and Jul 18) and a trend channel line overshoot.
- They need to create follow-through selling next week to increase the odds of a reversal down.
- Since this week’s candlestick was a bear bar closing near its low, it is a sell signal bar.
- Because of the lack of follow-through buying this week, odds slightly favor the market to trade at least a little lower.
- Traders will see if the bears can create follow-through selling or will next week trade slightly lower but close as a doji or with a bull body and a long tail below.
- If the bears get strong follow-through selling, the odds of a deeper pullback will increase.
The Daily EURUSD chart
- The EURUSD traded slightly higher earlier in the week but reversed to close near the April high (breakout point).
- Last week, we said that the first pullback would likely be minor, and the odds slightly favor at least a small second leg sideways to up.
- The bulls got a strong breakout from a wedge bull flag (Jun 23, Jun 30, and Jul 6) and a larger second leg sideways to up completing the wedge pattern with the first two legs being February 2 and April 26.
- They want the breakout above April to be the start of a new leg lasting many weeks, like the one which started in November 2022. They want a channel up after a small pullback.
- The next targets for the bulls are the Jan/Feb 2022 highs and a measured move using the height of the January-June trading range which take them to around October 2021 high.
- The move up is strong enough for traders to expect at least a small second leg sideways to up after a slightly larger pullback.
- The bears hope to get a failed breakout above the April high.
- They want a reversal down from a trend channel line overshoot and a wedge top (Feb 2, Apr 26, and Jul 18).
- They will need to continue creating consecutive bear bars closing near their lows to increase the odds of a failed breakout.
- For now, odds slightly favor the market to still be in always in long.
- However, the EURUSD may still trade sideways to down for a while more, probably testing the 20-day exponential moving average to work off the recent overbought conditions.
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