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Weekly EURUSD Pullback

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Market Overview: EURUSD Forex

The market formed a weekly EURUSD pullback, testing near the 2-week EMA. The bears need to create follow-through selling next week (preferably closing below the 20-week EMA) to increase the odds of a deep pullback. The bulls want at least a small second leg sideways to up to retest the July 17 high and want the 20-week EMA to act as support.

EURUSD Forex market

The Weekly EURUSD chart

EURUSD Weekly: Pullback Testing 20-Week EMA, Weekly EURUSD Pullback
  • This week’s candlestick on the weekly EURUSD Forex chart was a bear bar with a long tail below, closing below the middle of its range.
  • Last week, we said that the first pullback may only be minor. Traders will see if the bears can create a strong entry bar or if the market trades slightly lower but stalls and reverses higher.
  • The market traded lower in the first half of the week followed by sideways trading, closing off its low.
  • Previously, the bulls had a reversal from a higher low major trend reversal and a wedge bull flag (Feb 14, Apr 16, and Jun 26).
  • They created a 4-bar bull microchannel closing above the 20-week EMA testing near the bear trend line. That means strong bulls.
  • They want at least a small second leg sideways to up to retest the July 17 high and want the 20-week EMA to act as support.
  • They need to create a breakout above the June high and the triangle with follow-through buying to increase the odds of a retest of the trading range high (Dec 28).
  • The bears see the recent move simply as a buy vacuum and a bull leg within a trading range.
  • They want a reversal from a wedge bear flag (Mar 8, Jun 4, and Jul 17) or a double top bear flag (Jun 4 and July 17) from around the top of the triangle pattern.
  • They need to create follow-through selling next week (preferably closing below the 20-week EMA) to increase the odds of a deep pullback.
  • If the market trades higher, they want a reversal from a small double top with July 17 and the bear trend line to act as resistance.
  • Since this week’s candlestick is a bear bar closing in its lower half with a long tail below, it is a sell signal bar for next week albeit weaker.
  • Because it is following a 4-bar bull microchannel, traders want to see if there are buyers below the first pullback.
  • For now, traders will see if the bears can create a follow-through bear bar.
  • Or will the market stall around the 20-week EMA followed by a retest of the July 17 high?
  • The market is trading around the upper third of the trading range which can be the sell zone of trading range traders.
  • The bear trendline is an area of resistance.
  • The EURUSD is in an 88-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: Pullback to 20-Day EMA, Middle of TR
  • The EURUSD traded lower in the first half of the week. The market then stalled around the 20-day EMA for the rest of the week.
  • Last week, we said that the odds slightly favor a minor pullback (likely 2-legged) which may have started last week.
  • Previously, the bulls got a reversal from a higher low major trend reversal and a wedge bull flag (Feb 14, Apr 16, and Jun 26).
  • They created a tight bull channel trading far above the 20-day EMA.
  • While the market traded above the June high, there was no follow-through buying.
  • They see the current move simply as a pullback.
  • They want at least a small second leg sideways to up to retest the recent leg extreme high (Jul 17) even if it forms a lower high.
  • The bulls want the 20-day EMA to act as support.
  • The bears see the prior move simply as a buy vacuum testing the trading range high and the bear trend line.
  • They see a larger wedge bear flag forming (Mar 8, Jun 4, and Jul 17), a double top bear flag (Jun 4 and Jul 17) and a parabolic wedge (Jul 5, Jul 12, and Jul 17).
  • They got a reversal from around the upper third of the trading range and from the bear trend line area.
  • If the market trades higher, they want a second leg sideways to down to retest the current leg extreme low (now Jul 24).
  • They need to create follow-through selling trading far below the 20-day EMA to increase the odds of testing the June low.
  • The move up from June 26 is in a tight bull channel therefore strong.
  • Traders expect at least a small second leg sideways to up to retest the recent leg extreme high (Jul 17) after the pullback.
  • If the retest of the high is weak and sideways, forming a lower high, odds slightly favor at least another leg down after that.
  • For now, odds slightly favor the market to still be in the sideways to down pullback phase.
  • Traders will see if the bears can continue to create follow-through selling trading below the 20-day EMA.
  • If the bears get strong consecutive bear bars trading far below the 20-day EMA, it could swing the odds in favor of the bear leg beginning.
  • Or will the market stall around the 20-day EMA followed by a small retest of the July 17 high?
  • The market is trading near the middle of the trading range which can be an area balance.
  • Traders will continue to BLSH (Buy Low, Sell High) within a trading range until there is a breakout with follow-through selling/buying.
  • Poor follow-through and reversals are hallmarks of a trading range.

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