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Minor Pullback on EURUSD

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Market Overview: EURUSD Forex

This week formed a minor pullback on the EURUSD weekly chart. The bulls need consecutive bull bars closing near their highs, trading above the 20-week EMA to increase the odds of the bull leg resuming. The bears want the 20-week EMA to act as resistance followed by at least a small leg sideways to down to retest the February 14 low.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Minor Pullback, Bulls Need Follow-through, Minor Pullback on EURUSD
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull bar with a long tail above.
  • Last week, we said that until the bulls can create a few strong consecutive bull bars, odds slightly favor any pullback (bounce) to be minor and overall favor sideways to down still after the pullback.
  • This week traded above the 20-week EMA but reversed to close below it and close below the middle of the candlestick.
  • The bulls want a retest of the December and July highs followed by a breakout above.
  • They see the current pullback (from Dec to Feb) as minor and want the 20-week EMA or the bull trend line to act as support.
  • They want a reversal from a double bottom bull flag (Dec 8 and Feb 14). 
  • The problem with the bull’s case is that the move down is in a tight bear channel. 
  • They will need consecutive bull bars closing near their highs, trading above the 20-week EMA to increase the odds of the bull leg resuming. 
  • The bears 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).
  • If the market trades higher, the bears want the 20-week EMA to act as resistance followed by at least a small leg sideways to down to retest the February 14 low. 
  • Since this week is a bull bar closing below the middle of its range with a long tail above, it is not a strong buy signal bar for next week.
  • Traders will see if the bulls can create a follow-through bull bar, or will the market continue to stall around the 20-week EMA.
  • Traders are looking at the strength of the pullback (bounce). If it is weak and lacks sustained follow-through buying and stalls at the 20-week EMA (as it is now), the odds of another leg down will increase.
  • The EURUSD is in a 65-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.
  • For now, the market may still be in the sideways to up pullback phase.
  • Until the bulls can create a few strong consecutive bull bars, odds slightly favor any pullback (bounce) to be minor and overall favor sideways to down still after the pullback.
  • However, if the bulls can create a few strong consecutive bull bars closing above the 20-week EMA, it can swing the odds in favor of the bull leg resuming.

The Daily EURUSD chart

EURUSD Daily: DB Bottom Bull Flag, 2-Legged Pullback
  • The EURUSD traded sideways to up for the week, closing above the 20-day EMA.
  • Last week, we said as the bear leg has lasted for a while, we may see a minor pullback (bounce) attempt again. Traders will see the strength of the pullback.
  • Previously, the bears were able to able to create sideways to down trading below the 20-day EMA (from Dec to Feb), albeit not yet very strong (a lot of overlapping price action).
  • They got the third leg down (therefore a wedge, Jan 5, Feb 6, and Feb 14) breaking below the December 8 low but lacked follow-through selling.
  • They want the EURUSD to stall around the 20-day EMA or the bear trend line area and want a reversal from a double top bear flag (Feb 2 and Feb 22).
  • They want a retest of the February 14 low and another breakout attempt below the December 8 low after the current pullback.
  • The bulls see the move down as forming a double bottom bull flag (Dec 8 and Feb 14) and a wedge bull flag (Jan 5, Feb 6, and Feb 14). 
  • They want at least a TBTL (Ten Bars, Two Legs) pullback, which is currently underway.
  • If the market pulls back slightly, they want at least another small leg to retest the February 22 high.
  • They will need to create sustained follow-through buying closing far above the 20-day EMA and the bear trend line to increase the odds of the bull leg resuming.
  • So far, while the prior move down (to the Feb 14 low) is persistent, it is not yet very strong (a lot of overlapping price action).
  • Because the bear leg has lasted for a while, traders expect a minor pullback (bounce) which is currently underway.
  • Traders are looking at the strength of the pullback (bounce). If it is weak and lacks sustained follow-through buying and stalls around the 20-day EMA or the bear trend line area, the odds of another leg down will increase.
  • So far, the pullback while lacking strong bull bars is in a tight bull channel, which means persistent buying. Odds slightly favor at least a small second leg sideways to up after a small pullback.
  • For now, the market may still be in the sideways to up pullback phase. Traders will see if the bulls can create more buying pressure (consecutive bull bars closing near their highs). 
  • If the pullback is sideways and weak, the odds of a retest of the February 14 low and a breakout below it will increase.
  • Overall, the prior move down is strong enough to favor at least a small second leg sideways to down after the current pullback.

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