The daily chart of the EUR/USD market has been reversing up from a test of the 2017 gap. Last week’s low was 1 tick above the bottom of the gap.
Today’s bar is surprisingly big. It makes it likely that a 2 – 3 week short covering rally is underway. The bulls are now testing the bottom of the 4 month trading range.
Because the momentum up is strong, this rally might reach the January 31 sell climax high before there is more than a 2 – 3 day pullback. Traders expect sideways to up for at least another week or two.
When a rally is as strong as this, there is usually at least a small 2nd leg up after the 1st reversal down. That reversal usually lasts only a day or two. Therefore, the 1st reversal down will probably be minor.
The bears will need at least a micro double top before they can get more than a week of selling. Now that the EUR/USD is breaking strongly above the October low, that low will be support again.
Overnight EUR/USD Trading
The 5-minute chart of the EUR/USD Forex market has rallied strongly in a bull channel overnight. Day traders have been buying for scalps and for a swing up.
At some point, the rally will stall and evolve into a trading range. Once there has been a 20 – 30 pip pullback, bear day traders will look for shorts. However, they will only scalp.
Traders expect the daily chart to work sideways to up for at least another week. Therefore, day traders will expect more buying than selling opportunities. Also, they will aggressively buy the 1st 50 – 100 pip pullback.
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