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EURUSD Pullback to 20-Week EMA

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Market Overview: EURUSD Forex

The EURUSD Forex pullback to the 20-week EMA (exponential moving average) on the weekly chart. The bears got follow-through selling following last week’s big bear bar. They want a retest of the March low. The bulls hope to get at least a retest of the April high after the current pullback. They want the 20-week exponential moving average to act as support. 

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: pullback-to-20-week-ema, HL or Retest March Low?
  • This week’s candlestick on the weekly EURUSD Forex chart was a small bear bar with prominent tails above and below.
  • Last week, we said that odds slightly favor the EURUSD to trade at least a little lower, possibly testing the 20-week exponential moving average.
  • This week pullback to the 20-week EMA (exponential moving average) but did not close below it.
  • The bears got a reversal down from a higher high major trend reversal and failed breakout above the February 2 high.
  • They got a follow-through bear bar following last week’s reversal down and want a retest of the March 15 low.
  • The bears will need to continue creating follow-through selling breaking far below the 20-week exponential moving average to increase the odds of a reversal down.
  • The move up from March 15 was in a tight bull channel which means strong bulls. 
  • The bulls got breakouts above the February 2 high in April and May; 3 times (a wedge – Apr 14, Apr 26, and May 3) but did not get sustained follow-through buying.
  • When the market does something a few times and fails, it will then do the opposite. The EURUSD stalled and has started the pullback phase.
  • The bulls hope to get at least a retest of the April high after the current pullback.
  • They want the 20-week exponential moving average to act as support. 
  • If the EURUSD trades much lower, they want a reversal up from a double-bottom bull flag with the March low. 
  • They want another big leg up completing the wedge pattern with the first two legs being February 2 and April 26.
  • Since this week was a bear bar closing below the middle of its range, it is a sell signal bar for next week. 
  • The prominent tail below makes it a weaker signal bar, especially since it is sitting at potential support.
  • For now, the odds slightly favor a small second leg sideways to down after a pullback.

The Daily EURUSD chart

EURUSD Daily: Start of PB, Tight Bear Channel
  • The EURUSD pulled back slightly earlier in the week and then formed a second leg sideways to down for the rest of the week. Friday traded slightly lower but reverse to close as a bull bar with a prominent tail above.
  • Last week, we said that odds slightly favor the EURUSD to be in the pullback phase, and for a second leg sideways to down after a small pullback.
  • The bears got a reversal down from a higher high major trend reversal (with Feb high), a wedge (Mar 23, April 4, and April 14) and a micro wedge (April 14, April 26, and May 3).
  • The pullback is in a tight bear channel breaking far below the 20-day exponential moving average.
  • The move down is strong enough for traders to expect at least a small second leg sideways to down after a slightly larger pullback.
  • Traders expect at least TBTL (Ten Bars, Two Legs) in the pullback phase. The pullback currently has 10 bars (candlesticks).
  • The bulls hope the pullback will form a higher low. 
  • They want another strong leg up completing the wedge pattern with the first two legs being February 2 and April 26.
  • At the very least, they want a small leg retesting the current leg extreme high (April 26) after the pullback.
  • They want a reversal up from a parabolic wedge (May 9, May 15, and May 19).
  • Because of the tight channel down, the bulls will need a strong reversal bar or at least a micro double bottom before they would be willing to buy more aggressively.
  • If the EURUSD trades much lower, they want a reversal up from a larger double-bottom bull flag with the March low.
  • The move down since May 4 is in a tight bear channel. That means strong bears.
  • While Friday was a bull bar closing above the middle of its range, it has a prominent tail above. It is also following a tight bear channel. It is not an ideal buy setup.
  • For now, odds slightly favor at least a small second leg sideways to down after a slightly larger pullback.

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