- EUR/USD has formed two consecutive bear bars closing below their midpoints, with one closing on its low.
- The bulls have a credible wedge top, and the odds favor a selloff down to the December 12 low at a minimum. This breakout led to the final leg-up in the rally.
- The channel up is tight, which increases the odds that any selloff will be minor and lead to more sideways trading than a strong bear breakout.
- The market will likely have to test the moving average (blue line) soon since it has been away from it for over 25 bars.
- The market may have to get down to the December 8 low, which was the final leg of the rally. Typically, when the market forms a wedge, it will test the start of the third leg in the wedge.
- The market may have to reach the November 21 low, which was the start of the channel.
- The rally up to the December high is likely a minor reversal on the weekly chart. This means the weekly chart traders expect a pullback to fall below the November 21 low over the next several months.
- While the bulls have done an excellent job forming a tight channel, the odds favor a two-legged pullback to the moving average at a minimum. The bulls may give up, and the market gets a sell vacuum test of the moving average; however, more likely that the market will go sideways to down.
EUR/USD: 2 Legs Down Likely
