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EUR/USD Daily Chart
- The EUR/USD yesterday formed a bear breakout of the recent tight trading range and reached the May 31st low.
- The bears hope that yesterday started a successful breakout below a tight bear channel with open gaps. Next, the bears want a strong follow-through bar today, and a close below the May 31st low.
- More likely, yesterday’s big bear breakout was a sell climax test of support (May 31st) that will lead to profit-taking by the bears.
- While the market is still Always In Short and may get a second leg down after yesterday’s bear breakout, the odds are that the downside will be limited.
- Traders selling here are hoping that the bulls get squeezed out of longs, and the downside breakout becomes stronger.
- While the odds favor the formation of a trading range, the bulls need a decent buy signal bar or a strong upside breakout to buy. The bears will stay short without it, and the downside will likely continue.
- Overall, it is reasonable to expect the bears to get one more brief leg down after yesterday’s bear breakout, followed by a reversal attempt by the bulls.