- Bulls on the EUR/USD gave up early, a couple of hours before the U.S. Session. This is likely due to the news of Russia invading Ukraine.
- The current bar on the day session is a surprise, which means traders will expect a second leg down, which will probably fall below the January low.
- Bears are hopeful that they can get a measured move down from the November – February trading range to get the market close to the 2020 lows. While this is possible, it is unlikely after all of the buying pressure the market has had over the past 2 months.
- This is an attempt at trend resumption down; however, it is more likely to lead to another reversal attempt, just like the bear breakout on January 27 led to a reversal up.
- Bears need today’s bar to close on or near its low. Next, the bears need strong follow-through. Otherwise, traders will begin to buy aggressively as they did on January 31 after January 28 was a doji (a bad follow-through bar for the bears).
- Bulls expect today’s bear bar to lead to a failed breakout and a test back to the February 3 bull breakout.
- Next, the bulls will expect a bull breakout of the February high and a measured move up to the October 2021 high, followed by a test of the September 2021 high.
- Overall, traders will pay close attention to how today closes, along with the follow-through over the next few trading days.
- I want to point out a good example of an endless pullback that happened here:
- Bulls got a strong 4-bar rally on February 3. However, notice the market took 5 trading days to go above the January high, and it only went 12 pips above that.
- That is a red flag for traders and a big sign of disappointment for the bulls (it means most bulls were more interesting in selling out of longs than buying more at new highs).
- Next, the bulls tried to form a credible stop entry buy on February 15, following 2 consecutive bear bars.
- Bulls tried on February 22 to form a double bottom higher low; however, it was in a 6-bar tight trading range, which lowers the odds for the bulls, which is why February 22 closed as a doji.
- The point is that when you get a pullback after a strong-looking breakout in a trading range, the Always In direction does not usually change until it is low in the range, such as today. It traps traders into holding onto a long position, and by the time it has reversed, the market is close to the bottom of the range.
EUR/USD: Bulls Gave Up Early
