EUR/USD Bears Look for a Follow-Through on Yesterday's Breakout
EUR/USD Bears Look for a Follow-Through on Yesterday's Breakout
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EUR/USD
+0.18%
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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.
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