- The market sold off last Friday on the EUR/USD and today reached a 50% retracement of the strong bull breakout ending on February 4.
- Today, bears want another strong bear bar to raise the probability of lower prices.
- Even if the bears get a second strong bear trend bar today, that would increase the odds of a trading range. This does not mean a high probability of selling off to the January lows. It just means the odds would favor more sideways.
- More likely, today will be disappointing for the bears, confirming that this selloff is likely a pullback from the 5 bar bull breakout and the odds still favor a bull breakout and second leg up that test the October lows.
- Traders can argue that February 10 was the second leg for the bulls, and therefore, the requirement of a second leg has been met. However, bulls will likely need a more credible test before traders expect lower prices.
- Bears have a credible double top with the January and February highs. While it is not likely the bears get a bear breakout below the neckline (January low), if Europe handles the possible Russian invasion of Ukraine poorly, that could be the catalyst for a successful bear breakout and measured move down.
- Overall, today is important to see how convicted both sides are. The bulls have a possible second leg trap, and if they can get a strong bull signal bar today, it may set up a reasonable stop entry buy for tomorrow. That could lead to a test of the February highs.
- Bears have a surprise bar with last Friday’s bear breakout and are hopeful it leads to a small second leg down. More likely, we are in a trading range, which means today will likely be disappointing for both the bulls and the bears.
EUR/USD: Technicals Indicate Sideways Movement
