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2-Legged EURUSD Pullback

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Market Overview: EURUSD Forex

The bulls hope that the market is simply forming a 2-legged EURUSD pullback and want a resumption of the bull leg after the pullback phase. The bears want a reversal from around the upper third of the large trading range from a double top bear flag (Dec 28 and Aug 23) and a micro double top (Aug 23 and Aug 26).

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: No FT Selling, 2-Legged PB or LH MTR?, 2-Legged EURUSD Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was a bull bar with a long tail above closing in its lower half.
  • Last week, we said that the odds slightly favor the market to trade at least a little lower. Traders will see if the bears can create a follow-through bear bar or will the market trade slightly lower but close with a long tail or bull body instead?
  • The market traded lower earlier but reversed higher from midweek onwards. Friday traded higher but reversed to close off the week’s high.
  • Previously, the bulls got a breakout above the December 28 high. However, they could not create follow-through buying following the breakout.
  • They want at least a small retest of the August 26 high. The market formed a retest of the August high this week. However, it formed a lower high and was not a strong bull bar.
  • The bulls hope that the market is simply forming a two-legged pullback and want a resumption of the bull leg after the pullback phase.
  • If the market trades lower, they hope that the bull trend line or the 20-week EMA will act as support.
  • The bears see that the lack of follow-through buying (following the breakout above the December high) suggests that the recent rally could be a buy vacuum test of the trading range high (July).
  • They want a reversal from around the upper third of the large trading range from a double top bear flag (Dec 28 and Aug 23) and a micro double top (Aug 23 and Aug 26).
  • They were not able to create a follow-through bear bar this week.
  • They see this week as a pullback and hope to get another leg down testing near the 20-week EMA.
  • Since this week’s candlestick is a bull bar closing in its lower half with a long tail above, it is not a strong buy signal bar for next week.
  • Odds slightly favor the market to remain in the sideways to down pullback phase.
  • Traders will see if the bears can create another leg down testing near the 20-week EMA.
  • Or will the market stall around the September 3 low area instead?
  • The market trades around the upper third of the large trading range which can be the sell zone of trading range traders.
  • The EURUSD is in a 94-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 a breakout with follow-through selling/buying.
  • Poor follow-through and reversals are hallmarks of a trading range.

The Daily EURUSD chart

EURUSD Daily: LH MTR or 2-Legged Pullback?
  • The EURUSD traded slightly lower earlier in the week but reversed higher from midweek onwards. Friday traded higher but reversed into a bear bar with a long tail above.
  • Previously, we said that traders would see if the bulls could create a retest of the July high or if the market would trade slightly higher but stall and form a minor pullback. If there is a pullback, traders expect at least a small sideways to up leg to retest the leg extreme high (Aug 23).
  • The market formed a minor pullback followed by a second leg sideways to up testing the recent leg high (Aug 23) on Friday creating a lower high.
  • Previously, the Bulls created a tight bull channel with strong consecutive bull bars testing the December high.
  • They see the current move simply as a two-legged pullback.
  • They want a strong retest of the August high and a breakout with follow-through buying after the current pullback
  • The bulls want the 20-day EMA and the bull trend line to act as support.
  • The bears see the prior rally as a buy vacuum test of the trading range high.
  • They got a reversal from a parabolic wedge (Aug 5, Aug 14, and Aug 23) and a failed breakout above the December high from around the upper third of the large trading range.
  • They see this week as a retest of the prior leg high (Aug 23) and want a reversal from a lower high major trend reversal.
  • They must create consecutive bear bars closing near their lows and trading far below the 20-day EMA to increase the odds of the bear leg beginning.
  • Since Friday was a bear bar closing in its lower half, it is a sell signal bar for Monday.
  • The market may still be in the sideways to down pullback phase.
  • Traders will see if the bears can create another leg down or if the market will trade slightly lower but stall around the 20-day EMA area.
  • If the bears get strong consecutive bear bars trading far below the 20-day EMA, that will increase the odds of the bear leg beginning.
  • If the market continues to stall around the 20-day EMA, that will increase the odds of another retest of the August 23 high.
  • The market is trading near the upper third of the large trading range which can be the sell zone of trading range traders.
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until a breakout with follow-through selling/buying.
  • Poor follow-through and reversals are hallmarks of a trading range.

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