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EURUSD Climactic Bear Leg

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Market Overview: EURUSD Forex

The weekly chart formed a EURUSD climactic bear leg in the form of a tight bear channel. Odds favor the first pullback to be minor and a retest of the current leg extreme low (Oct 3). The bulls need to create sustained follow-through buying to increase the odds of a deeper pullback (bounce).

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Climactic, Bull Reversal Bar at TR Low, EURUSD Climactic Bear Leg
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull reversal bar with a long tail below.
  • Previously, we said that while the EURUSD continue to slightly favor sideways to down, the move down has lasted a long time and is slightly climactic. A minor pullback can begin at any moment.
  • The pullback may have started this week.
  • The bulls hope that the strong move down is simply a sell vacuum within a trading range.
  • They want a reversal up from a double bottom bull flag (with Mar 15) and a parabolic wedge (Aug 3, Aug 25, and Oct 3).
  • The problem with the bull’s case is that the move down is very strong. 
  • They will need a strong bull reversal bar or at least a micro double bottom before they would think to buy more aggressively. 
  • This week was a reversal bar closing near its high albeit weaker because of the small bull body.
  • While the market is sitting at a potential support area (bottom of trading range), the bulls still need to do more to prove that they are at least temporarily back in control.
  • That means they need to create consecutive bull bars closing near their highs (follow-through buying) for the next few weeks.
  • The bears got a tight bear channel consisting of 11 consecutive bear bars. 
  • That increases the odds of at least a small second leg sideways to down after a pullback (bounce).
  • They want the pullback (bounce) to be weak (overlapping bars, doji(s), bear bars) and sideways, followed by another leg down from a lower high major trend reversal.
  • Since this week was a bull bar closing near its high, it is a buy signal bar for next week.
  • The last 2 weeks traded below the March low (trading range low) but reversed to close above it.
  • Odds slightly favor the EURUSD to trade at least a little higher and begin the pullback phase.
  • Any pullback would likely be minor and favor at least a small retest of the current leg low (now Oct 3) after the pullback. The pullback should last at least a few weeks.
  • Traders will see if the bulls can create follow-through buying over the next few weeks. Or will the pullback be weak and trade mostly sideways?

The Daily EURUSD chart

EURUSD Daily: Parabolic Wedge, Stall at TR Low
  • The EURUSD traded below the March low early in the week. The market then reversed higher by the end of the week. Friday was an outside bull bar closing near its high.
  • Previously, we said that while the market may still trade a little lower, the move down has lasted a long time and is slightly climactic. A minor pullback can begin at any moment. 
  • The bears got a tight bear channel down which lasted almost 12 weeks.
  • They want a strong breakout below the March low and a measured move down based on the height of the 43-week trading range.
  • The move down since July 18 is in a tight bear channel. That increases the odds of at least a small second leg sideways to down after a larger pullback.
  • If there is a larger pullback (bounce), the bears want a reversal down from a lower high major trend reversal.
  • The bulls hope that the recent move down is simply a sell vacuum test of the 43-week trading range low.
  • They want a larger pullback from a parabolic wedge (Aug 25, Sept 14, and Oct 3) and a failed breakout below the trading range low.
  • They need to continue creating consecutive bull bars closing near their highs, breaking far above the 20-day EMA and the bear trend line to increase the odds of the bull leg beginning.
  • Since Friday was an outside bull bar closing near its high, it is a buy signal bar for Monday.
  • The move down since July 18 has lasted a long time and is slightly climactic.
  • A minor pullback can begin at any moment. It may have begun this week.
  • If a pullback (bounce) begins, traders will see the strength of the pullback. If it is weak (overlapping bars, doji(s), bear bars) and sideways, the odds of another leg down increase.
  • Any pullback that begins should last at least TBTL (Ten Bars, Two Legs).
  • For now, traders will see if the bulls can start creating more buying pressure or will the pullback attempt be weak and sideways.

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