The EUR/USD has rallied strongly on the daily charts, up to the resistance of the September 2018 high. That was the start of the 2-year bear channel.
The rally from the March low has 3 legs. It is therefore a wedge bull channel and a buy climax. In addition, the rally of the past 3 weeks has 3 legs up in a tight bull channel. It is therefore a parabolic wedge buy climax. With 2 buy climax patterns at resistance, traders should expect some profit taking to begin within a week or so.
Yesterday’s high might be forming a micro double top with Monday’s high. This is in addition to the possible double top with the September 2018 high.
As strong as the rally has been over the past 3 weeks, this kind of price action is what traders typically see just before the bulls take profits. Traders should expect a 200 pip pullback to around the EMA to begin before the EUR/USD breaks much above 1.18.
When a bull trend is as strong as this one has been, there will be many traders eager to buy a pullback. Therefore, a pullback is more likely than a reversal into a bear trend.
EUR/USD Daily Technicals
5-Minute Chart Patterns
The 5 minute chart of the EUR/USD has been going sideways for 4 days. The bulls hope that this is a pause in the bull trend and that the rally will soon break above the September 2018 high.
Every trading range has both buy and sell setups. The bears are hoping that yesterday’s high formed a double top with Monday’s high. If not, they hope that a move above Monday’s high will reverse down. There would then be a wedge top this week.
Because the EUR/USD has been trading sideways for 4 days, day traders are looking for small swings lasting a few hours and for 10-20 pip scalps. After such a strong rally for several weeks, there will probably be a lot of back and forth trading over the next couple weeks. That means smaller swing trades and more scalping.