- The EUR/USD closed below the May 31st low for the first time. This indicates that the bears are getting a successful breakout below the May low.
- However, the bear channel is climactic and has not touched the moving average for 17 bars. This is also happening late in the selloff that began back in July.
- Although the bear channel is climactic, it is also tight. This increases the odds that the first breakout above the channel will fail.
- The bears are trying to get a bear breakout below the bear channel and major support. The odds are that yesterday’s bear breakout will probably fail, leading to a trading range.
- It is important to realize that the bear channel that began in July is a breakout on a higher time frame, such as the monthly chart.
- The monthly chart formed a bull breakout of a bear trend ending in July 2022. The bulls likely need a credible major trend reversal to transition the monthly chart into a bull trend. This means the EUR/USD could fall back to 1.0000 before the buyer arrives.
- Overall, while the daily chart is in a tight bear channel that is a breakout on a higher time frame, the daily chart will likely begin to go sideways for several days and develop into a trading range. Traders will probably disappoint the bears and try to reverse and test yesterday’s high and the moving average.
EUR/USD Closes Below May 31 Low: What's Next?
