The EUR/USD Forex market on the daily chart has been in a trading range. A trading range always has both a credible buy and sell signal. Reversals are more likely than successful breakouts.
The bulls see the chart as reversing up from a head and shoulders bottom. However, they need a strong breakout above the 6 day tight trading range. At a minimum, they want a bull bar closing near its high and above yesterday’s high. If they get that, traders will conclude that this is the start of a 2 week rally to the May 1 high or above.
But, if today does not close above yesterday’s high, traders will suspect that the bulls are not strong. If today or tomorrow is a bear bar closing near its low, there would then be a small Low 2 bear flag with the high from 3 weeks ago. Traders would then expect the bottom to fail. A strong reversal down this week would make a test of the March low likely next week.
Overnight EUR/USD Forex trading
The 5 minute chart of the EUR/USD Forex market has rallied in a tight bull channel overnight. It is testing yesterday’s high.
Yesterday was a weak outside up day. The bulls need today to close above yesterday’s high to convince traders that last week was the start of a 2 – 3 week rally. Therefore, the bulls will buy pullbacks to get the day to close at its high and above yesterday’s high.
Since today is a possible breakout day, there is an increased chance of an acceleration up today. So far, day traders have only been buying. The bull channel is tight. But the bars are not big. This is not aggressive buying.
If the EUR/USD starts to go sideways here, around yesterday’s high, the bears will begin to sell. Remember, they would like today to close near its low. Today would then be a sell signal bar on the daily chart.
Market have inertia
What is most likely? Markets have inertia. They tend to continue to do what they’ve been doing. The EUR/USD is in a 6 day tight trading range. It will probably stay there today.
The bull channel is tight so day traders so have only been buying. But if the EUR/USD has a 20 pip pullback around yesterday’s high, day traders will begin to sell as well.
Since today’s appearance can affect the direction over the next week, there is an increased chance of a bull breakout or a reversal down. The 1st reversal down will probably be minor. Consequently, the downside risk over the next couple of hours is small. The bears will probably need a 1 – 2 hour trading range before they can get a reversal down.
Most likely, today will soon enter a 20 pip trading range around yesterday’s high. Then, it will try to either breakout or reverse tomorrow.
https://www.euronews.com/2020/05/13/eur-usd-forex-market-trading-strategies-may-13-2020
2020-05-13 15:21:29Z
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