- EUR/USD bulls closed yesterday with a big bull bar closed above March 4.
- This means the bears are giving up and agreeing that last week’s bear breakout below the bear channel will likely be a failed bear breakout.
- Yesterday was strong enough to lead to a second leg up and a test of the 3-month trading range low.
- There are scale-in bulls who bought the 3-month trading range bear breakout around March 1. Those bulls are now deciding if they are going to exit back at their original entry, which is around the low of the 3-month trading range, or if they should stay long betting on a test of the February highs.
- The odds were that the 3-month trading range would be a final flag. Back in late January, it looked like the final flag setup was a bear breakout and reversal up in early February. The trading range expanded, and now the market is getting the same setup.
- Bulls hope the rally will be similar to the February 3 bull breakout (4 consecutive bull bars).
- While the market is probably always-in long and strong enough for a second leg up, traders will pay close attention to today. Will today be a strong bull trend bar, showing further conviction by the bulls and increasing the odds of more up, or will today be a doji or bear bar showing hesitation?
- Although the EUR/USD is likely going higher, there is a possibility that there could be a 50% pullback of the 2-day rally, so traders buying here have to be aware of the potential for a deeper pullback than the bulls would want.
- While this is a strong reversal and most bears should probably exit, traders do not know if this is the start of the rally that reaches the February high or will be a rally that leads to more sideways.
- Lastly, the odds are the market will test the top of the bear channel, and it could do so by getting more of a strong rally or by going sideways.
EUR/USD: Strong Breakout Testing 3-Month Trading Range
