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EURUSD Outside Doji

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Market Overview: EURUSD Forex

The weekly candlestick was a EURUSD outside doji, stalling around the December 8 low area. The bulls want a reversal from a double bottom bull flag (Dec 8 and Feb 14). The bears want the 20-week EMA to act as resistance followed by at least a small leg sideways to down to retest the February 14 low.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Stall at Dec 8 Low, Minor Pullback? EURUSD Outside Doji
  • This week’s candlestick on the weekly EURUSD Forex chart was an outside doji bar with a long tail below.
  • Last week, we said that because the move down has lasted for a while, we may see a minor pullback (bounce) followed by at least a small second leg sideways to down to retest the current leg extreme (Feb 6) after that. 
  • This week traded higher earlier in the week, followed by a reversal testing the February 6 low. The market then reversed to almost unchanged, forming consecutive doji(s) around the December 8 low.
  • The bulls want a retest of the December and July highs followed by a breakout above.
  • They see the current pullback (from Dec to Feb) as minor and want the 20-week EMA or the bull trend line to act as support.
  • They want a reversal from a double bottom bull flag (Dec 8 and Feb 14). 
  • The problem with the bull’s case is that the move down is in a tight bear channel. 
  • They will need consecutive bull bars closing near their highs, trading above the 20-week EMA to increase the odds of the bull leg resuming.
  • The bears see the rally from October to December as a retest of the prior leg’s extreme high (Jul 18).
  • They got a reversal from a wedge bear flag (Nov 3, Nov 29, and Dec 28) and a lower high major trend reversal.
  • They created a tight bear channel closing below the 20-week EMA. They want a retest of the trading range low (Oct 2023 low).
  • The move down consists of a 7-bar bear microchannel. Odds slightly favor sellers above the first pullback. That was the case this week.
  • If the market trades higher, the bears want the 20-week EMA to act as resistance followed by at least a small leg sideways to down to retest the February 14 low.
  • The last two candlesticks are doji bars trading around the December 8 low. The market is in an area of balance.
  • Sometimes the candlestick after an outside bar is an inside bar, forming an ioi (inside-outside-inside) breakout mode pattern. Or it might have a lot of overlapping range.
  • Or it could form another outside bar, thereby forming an oo (outside-outside) breakout mode pattern.
  • If the market trades slightly higher, traders will see the strength of the pullback (bounce). If it is weak and lacks sustained follow-through buying and stalls at the 20-week EMA, the odds of another leg down will increase.
  • The EURUSD is in a 64-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 there is a breakout with follow-through selling/buying.
  • For now, until the bulls can create a few strong consecutive bull bars, odds slightly favor any pullback (bounce) to be minor and overall favor sideways to down still after the pullback.

The Daily EURUSD chart

EURUSD Daily: DB Bottom Bull Flag, Bulls Need FT Buying
  • The EURUSD traded higher on Monday but reversed into a bear doji. Tuesday retested the February 6 low but lacked follow-through selling. The market traded sideways to up from midweek onwards.
  • Last week, we said that the move down is strong enough to favor at least a small second leg sideways to down after a pullback.
  • The bears were able to able to create sideways to down trading below the 20-day EMA, albeit not yet very strong (a lot of overlapping price action).
  • They got the third leg down (therefore a wedge) this week (Jan 5, Feb 6, and Feb 14) breaking below the December 8 low but lacked follow-through selling.
  • If the market trades higher, the bears want the EURUSD to stall around the 20-day EMA or the bear trend line area.
  • They want a retest of the February 14 low followed by another breakout attempt below the December 8 low.
  • The bulls see the pullback as forming a double bottom bull flag (Dec 8 and Feb 6) and a wedge bull flag (Jan 5, Feb 6, and Feb 14). 
  • They will need to create a few strong bull bars closing far above the 20-day EMA and the bear trend line to increase the odds of the bull leg resuming.
  • So far, while the move down is persistent, it is not yet very strong (a lot of overlapping price action).
  • Because the bear leg has lasted for a while, we may see a minor pullback (bounce) attempt again. 
  • Traders will see the strength of the pullback (bounce), if any. If it is weak and lacks sustained follow-through buying and stalls around the 20-day EMA or the bear trend line area, the odds of another leg down will increase.
  • For now, the move down is strong enough to favor at least a small second leg sideways to down after a slightly larger pullback.
  • Traders will see if the bulls can create some buying pressure. If the buying remains sideways and weak, the odds of a retest of the February 14 low and a breakout below it will increase.

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