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EURUSD Outside Bear Reversal Bar

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Market Overview: EURUSD Forex

The EURUSD Forex candlestick on the weekly chart was an outside Bear Reversal Bar closing near the low. The wedge pattern and loss of momentum (smaller bull bodies) increase the odds that at least a small pullback may have begun this week. The bulls want any pullback to be sideways and not deep. If the pullback is weak and sideways, the odds of another strong leg-up increase.

EURUSD Forex market

The Monthly EURUSD Forex chart

EURUSD Monthly: 50% PB of Selloff, Start of Minor PB? An Outside Bear Reversal Bar.
  • The January monthly EURUSD candlestick was a bull bar closing near its high with a long tail below.
  • Last month, we said that the odds slightly favor the EURUSD to trade at least a little higher.
  • January closed above the December high and the 20-month exponential moving average.
  • It was the fourth consecutive bull bar, with the last 3 candlestick closing near their highs. The bulls also have a 5-bar bull micro channel.
  • That means strong bulls. The market may have flipped into Always In Long.
  • The bulls want a continuation higher testing the February 2022 high.
  • Since January closed above the 20-month exponential moving average, the bulls will need to create a follow-through bull bar in February to increase the odds of higher prices.
  • If there is a pullback in February, the odds favor at least a small second leg sideways to up from a higher low major trend reversal.
  • The bears want a reversal lower from a lower high around the 20-month exponential moving average resistance.
  • However, they have not been able to create credible selling pressure in the last 4 months.
  • Because of the strong move-up, the bears will need at least a strong reversal bar or a micro double top before they would be more willing to sell aggressively.
  • Since January was a bull bar closing near its high, odds slightly favor the EURUSD to trade at least a little high, which it has done in early February.
  • Traders will see if the bulls can create a follow-through bull bar in February or will the EURUSD trade higher but reverse into a bear reversal bar, starting the pullback phase.
  • For now, 4 consecutive bull bars on the monthly chart represent climactic behaviour. The odds of a bear bar appearing within the next 1-3 months increase.
  • If there is a pullback within the next 1-3 months, the odds favor the pullback to be minor and traders expect at least a small second leg sideways to up after the pullback.

The Weekly EURUSD chart

EURUSD Weekly: Wedge Top, Outside Bear Reversal Bar
  • This week’s candlestick on the weekly EURUSD Forex chart was an outside bear reversal bar closing at the low with a long tail above.
  • Last week, we said that while odds slightly favor the EURUSD to trade sideways to up, we may also see at least a small pullback which can begin at any moment.
  • This week broke far above last week’s high but reversed into a reversal bar closing below last week’s low.
  • The bulls got a strong spike and channel up and the market may have flipped into Always In Long. They want an endless small pullback bull trend up.
  • Since the September low, the bulls have created bigger bull bodies with closes near their highs with follow-through buying, while the bear bars are weak with no follow-through selling. That means strong bulls.
  • The strong move up increases the odds of at least a small second leg sideways to up after a deeper pullback. 
  • The bulls want any pullback to be sideways and not deep. If the pullback is weak and sideways, the odds of another strong leg-up increase. This remains true.
  • The bears want a 2-legged sideways-to-down pullback lasting at least a few weeks. 
  • However, they have not yet been able to create credible selling pressure with strong bear bars and follow-through selling.
  • They hope to get a reversal lower from a lower high and a wedge top (Nov 15, Dec 5 and Feb 2).
  • Because of the strong move-up, the bears will need a strong reversal bar or at least a micro double top before traders would be willing to sell aggressively. 
  • This week was a strong reversal bar. It increases the odds that the EURUSD will trade at least a little lower. 
  • The wedge pattern and loss of momentum (smaller bull bodies) increase the odds that we will see at least a small pullback which can begin at any moment. It may have begun this week.
  • The first targets for the bears are the 20-week exponential moving average and the January 6 low.
  • For now, the bears will need to create strong follow-through selling to increase the odds of lower prices.
  • If the next few weeks trade slightly lower but close with weak bear bars with long tails below or dojis, the odds of another leg up increase.
  • The levels around 1.080 are resistances (20-month exponential moving average – not shown on chart).

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