The forex market has been in a trading range for nine months, with no sign that it is about to end. The 2-week rally is at minor resistance, which increases the chance of the chart going sideways for a week or two.
EUR/USD now has consecutive bull bars after a 2-month wedge bottom in 4-month bear trend. It’s testing the bottom of the December to February trading range (tan-colored rectangle) at the 1.20 Big Round Number. There is a gap between the lowest body in that trading range, and last week’s bull body.
A gap down is a sign of strong bears. Bulls need to erase that bearish strength by closing that gap. They need the body of a bull bar in this rally to overlap the body of bear bar in that trading range. If the gap gets closed, the 4-month bear trend will have evolved into a trading range, at which point, a 50-50 chance will develop testing the January high, instead the November low.
But, since its at resistance, there’s an increased chance of it trading sideways for a week or two.
The 9-month trading range (blue rectangle) should continue for a couple months. If the rally forms a lower high over the next month or so, there will be a lower high major trend reversal. A lower high after a wedge top is the right shoulder of a head and shoulders top. If that forms, there would be a 40% chance of a breakout below, and a measured move down.
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