EUR/USD: Wedge Rally To Double Top

EUR/USD saw an overnight selloff after a buy climax. Traders are deciding if was just a brief pullback in the bull trend, or if it signals the start of a trend reversal down. Todays close will help traders decide. The single currency was turning down from a micro double top and wedge rally, to a double top with the Feb. 25 high.

If EUR/USD closes today near its low, then the selloff will probably reach the May 5 low, which was the bottom of last weeks buy climax, as well as the bottom of a 4-week trading range.

Because of last weeks strong rally, a close today in the middle range or above will probably provide bulls with at least one more leg up to Feb. 25.

EUR/USD Forex Chart

Overnight EUR/USD forex trading on the 5-minute chart

• Sold off overnight, but big reversal up in past 10 minutes. Now, in middle of days range.

• Sell climax and reversal up were strong enough for this to be low for rest of day.

• Bears need today to reverse back down and close near low of day, but currently have only 40% chance.

• Bulls want today to close in the middle of the range, or near the high of the day. That will increase the chance of today being just a pullback in the 6-week rally.

• At the moment, the bulls are winning and day traders are buying aggressively.

• Bulls want today to close here or higher, but Big Down, Big Up creates Big Confusion. That typically leads to a trading range. Therefore, day traders will expect the bull trend reversal to either weaken into a bull channel or evolve into a trading range.

• If there is a 20-pip pullback, day traders will again sell, but probably only for scalps.

• Today will probably be sideways or up for the rest of the day.

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