EUR/USD: Bears Lurk Above Yesterday’s High
- The EUR/USD pair formed a bull bar yesterday, closing on its high. The Bulls see yesterday’s buy signal bar as a breakout pullback buy setup, hoping for a second leg up and a breakout above the April high.
- The bears see a wedge top (see chart above) and expect a test of the April 10th low, the bottom of the third leg.
- Wedge top patterns typically have two legs, and after the two consecutive bear bars (April 14th and April 17th), the odds are there would be sellers above yesterday’s high.
- In general, High 1 buy signal bars like yesterday are reasonable to buy signals bars in strong bull trends.
- However, when the market transitions into a trading range, bars like yesterday (April 18th) are generally lower probability buys.
- The bulls know there are probably sellers above and they will look to buy and scale in lower. This means that the odds favor sideways rather than straight down.
- With the market holding above the moving average, the bears need to break below it and ideally get consecutive strong closes below the moving average.
- With the market above the moving average for several bars, the odds are that the bulls will buy the first close below the moving average.
- Overall, the market will probably reach the April 10th low or get close to it. However, traders should expect continued trading range trading, until there is a strong breakout up or down.