- After creating a wedge top, the EUR/USD pair has formed a very tight trading range over the past few days.
- The odds are that the market will have at least a small second leg down to the moving average and the Dec. 12 low, which is the bottom of the third leg in the wedge top.
- The bulls can argue that the market is in a small pullback bull trend. However, it is becoming climactic. The bears have had multiple reversal attempts, and the market has been away from the moving average (blue line) for 28 bars which is climactic behavior.
- Overall, traders will expect a pullback to the moving average and a test of the Dec. 12 low soon.
- The rally up to the December high is the first breakout of the bear channel on the higher time frame. This increases the odds of the market having a deep pullback on the daily chart, which would form a higher low major trend reversal.
EUR/USD: Second Leg Down to Moving Average Likely
