- The EUR/USD finally reached the moving average yesterday after testing the measured move target (purple line) above the prior day.
- Yesterday’s bar is a big enough surprise to increase the odds that the bears will probably get a second leg down and at least make the market go sideways.
- The bulls hope that yesterday is a second leg trap that traps the bears into selling a failed breakout (January 3rd).
- Yesterday was the first opportunity traders have had to buy at the moving average in over 30 bars, which means traders will buy.
- Bulls buying at the moving average are likely buying for the scalp, though not for a new high above January 2nd.
- Traders will pay close attention to today’s close. If the bar closes on or near its high, it will increase the odds that the bulls will be able to trap the bears and get a new high. If today’s bar sells off into the close, it will increase the odds that the market will get a second leg down.
- Even if today’s bar closes on its high, traders will still be suspicious and wonder if the bears need a second leg down.
EUR/USD: Possible Second Leg Trap
