EUR/USD: Stuck In A Trading Range

The EUR/USD on the daily chart has been stuck in a trading range at the resistance of the September 2018 high. That was the start of the 18-month bear channel.

EUR/USD Daily Chart

What typically happens after a break above a bear channel is that the rally tests the start of the channel and then there is a selloff. At that point, the bear channel will have evolved into a trading range. This is still the most likely outcome here, despite the unusually strong summer rally.

Most wedge tops have 3 reversals. This one now has 4. August was a trading range that was tilted up a little.

The EUR/USD has been in a bull channel for 5 weeks as well as a trading range. A bull channel is also a wedge top. If the bulls get consecutive closes above the range, they will expect a rally up to the February 2018 high of 1.25.

It is still slightly more likely that there will be a bear break out of the trading range and then a test of the breakout points. These are the March 9 and June 10 highs.

Trading ranges can last a long time. Until there is a breakout, there is no breakout. Traders will look for reversals every few days. Also, the probability of a successful bear breakout is about the same as for a bull breakout. A trading range is a Breakout Mode pattern, even in a bull trend.

Overnight EUR/USD Forex trading

Yesterday was a sell signal bar for a wedge top on the daily chart. The EUR/USD triggered the sell signal overnight by breaking below yesterday’s low.

The 5-minute chart formed a trading range around yesterday’s low and then broke to the downside. It then quickly entered a 2nd trading range.

This is a Trending Trading Range pattern and is a weak bear trend. It has been sideways for 6 hours in a 35 pip range.

Since it is in a trading range, day traders are trading reversals for 10 pip scalps. The bulls want a reversal back up to above yesterday’s low. They hope that today will be a High 1 buy signal bar on the daily chart.

The bears are happy with the EUR/USD staying in the lower range. Today would then be a bear entry bar on the daily chart, which would increase the chance of at least slightly lower prices tomorrow.

While they would like another leg down today, that is not necessary. This week is already a good sell signal bar on the weekly chart. All the bears need to do is prevent a reversal up.

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