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EURUSD Pullback from Wedge

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Market Overview: EURUSD Forex

The weekly chart formed a EURUSD pullback from wedge testing the 20-week EMA. The bears want a reversal from a wedge bear flag (Oct 12, Nov 3, and Nov 29) and a lower high major trend reversal. The bulls want a reversal from a higher low major trend reversal and the 20-week EMA to act as support.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Bears Got Follow-through, Wedge EURUSD Pullback from Wedge
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar closing in the lower half with a small tail below.
  • Last week, we said the odds slightly favor any pullback to be minor and at least a small second leg sideways to up after a pullback. Traders will see if the bears can create follow-through selling or if will they fail to do so again.
  • The bears got a follow-through bear bar closing slightly below the 20-week EMA.
  • Previously, the bears got a tight bear channel testing the trading range low (Jan 6).
  • 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) and a lower high major trend reversal.
  • They hope that the second leg sideways to down is currently underway.
  • They will need to create a couple of bear bars trading below the 20-week EMA to increase the odds of retesting the October 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).
  • If the market trades slightly lower, the bulls want a reversal from a higher low major trend reversal and the 20-week EMA to act as support. This remains true.
  • Since this week’s candlestick is a bear bar closing in its lower half, it is a sell signal bar for next week.
  • Odds slightly favor the EURUSD to still be in the sideways to down minor pullback phase. 
  • Traders will see if the bears can create a follow-through bear bar trading below the 20-week EMA or will the market trade slightly lower but stall around the 20-week EMA area.
  • If the bears can get a few strong consecutive bear bars closing below the 20-week EMA, the odds will swing in favor of retesting the trading range low.

The Daily EURUSD chart

EURUSD Daily: Deep Pullback, Trading Range
  • The EURUSD traded lower for the week. Friday broke below Thursday’s outside bull bar but closed around the middle of its range with a long tail below.
  • Previously, we said that the odds slightly favor the market to still be in the sideways to up phase, even if there are some minor pullbacks in between.
  • 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 simply as a deep pullback of the whole selloff from the July 18 high.
  • If the market trades higher, they want the 20-day EMA to act as resistance and at least a small second leg sideways to down to retest the current leg extreme low (now December 8).  
  • 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 area for trading range traders.
  • They see the current move simply as a pullback and a retest of the breakout out point (Nov 6 high).
  • They want a reversal from a higher low major trend reversal.
  • They will need to create consecutive bull bars trading above the 20-day EMA to increase the odds of retesting the trading range high (April/May highs).
  • Since Friday was a bear bar closing in the middle of its range, it is a sell signal bar for next week, albeit weaker (long tail below).
  • 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.
  • 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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