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.
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