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Euro Rebounds, But Bear Channel Intact

08/13/2019 9:32 am EST

Focus: FOREX

Al Brooks, MD

Professional Trader, Author, Lecturer, Brooks Price Action, LLC and Brooks Trading Course

The EURUSD reversed up from below its five-month trading range on its weekly chart, but likely will remain range bound, reports Al Brooks.

The EURUSD reversed up strongly last week on its weekly chart after a break below the five-month trading range (see chart). That break was a reminder that the yearlong bear channel is still intact. The bulls need a strong breakout above the June high to make traders believe that the bear trend has finally ended. Without that, traders will continue to look for a reversal after every two- to three-week leg up or down.

EURUSD weekly Forex chart has weak buy signal bar and entry bar

Last week’s reversal up on the daily chart (not shown) was strong enough to make a second leg up likely. A reversal down from here will probably only last about a week before the bulls buy again.

dailyfx
Reversal up from Spike & Channel Bear Trend

The selloff from the June high on the daily chart formed a Spike and Channel Bear Trend. Traders see the July 11/July 19 double top as the start of the wedge bear channel. When a Spike and Channel Bear Trend reverses up, traders expect a test of the start of the channel. That means they will buy the first reversal down and look for a rally to around 1.1280 (July high).

If the current leg up continues to 1.1280 without more than a day or two pullback, traders will expect the first pullback to lead to a test of the next resistance. That is the June high of 1.1413.

Can last week’s high be a lower high that reverses down to below the August low? The momentum up last week makes it likely that bulls will buy the first three- to five-day reversal down. Consequently, a higher low and then a second leg up is a more likely outcome.

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