The EUR/USD forex market on the daily chart has been sideways for a month. It is in Breakout Mode. The pattern is now a triangle. Like all Breakout Mode patterns, there is a 50% chance of either a successful bull or bear breakout. Furthermore, there is a 50% chance that the 1st breakout will fail.
EURUSD Forex apex of triangle so breakout mode
When the EUR/USD is at the apex of a triangle, the bars get small and the reversals come every day or two. It is a Limit Order market. That means there are usually more buyers below bars and sellers above bars. Traders bet on reversals instead of a breakout into a trend.
Eventually, there is a breakout. It often follows the news. Tomorrow’s US unemployment report is a possible catalyst.
Overnight EUR/USD Forex trading
The 5-minute chart of the EUR/USD Forex market went sideways on the open but sold off over the past few hours. It traded below yesterday’s low and bounced. Remember, Breakout Mode pattern is a Limit Order market. There are usually more buyers below the prior day’s low betting on a reversal up than sellers selling and betting on a trend down.
While a successful breakout can come at any time, most attempts will lead to reversals. Consequently, the overnight selloff will probably have bad follow-through.
Traders expect a trading range around yesterday’s low instead of a strong breakout below the bottom of the 4 week trading range. Therefore, day traders will be willing to both buy and sell. Additionally, since they know the odds are against a big move, they will scalp for 10 – 20 pips.
But, they know a strong breakout can come any day. If there is a series of big trend bars up or down, they will switch to swing trading.