EUR/USD: Odds Favor Second Leg Dow
2022.10.14 11:38
– Yesterday was a big outside up bar; however, outside bars are usually trading range bars, which lead to more sideways movement with trend continuation.
– The bulls want follow-through after yesterday’s outside bar, but the channel before the outdoor bar is tight, which lowers the probability for the bulls.
– The bears will be disappointed with the outside up bar and may look to buy back shorts on any pullback from yesterday. The bulls know this and may look to buy a pullback, such as 50%.
– The odds favored a second leg down after the bear breakout that ended on Oct. 10, and they got their second leg down yesterday before the bar reversed up.
– The odds still favor a second leg up and test of the Oct. 4 close. Right now, traders are deciding if the market has enough buying pressure or if the market is going to reverse up after yesterday’s outside up bar.
– The bears want any rally to lead to a lower high from Oct. 5 and continue down with lower prices. While this is possible, the market has been in a bear channel on the daily chart since the middle of 2021. Since channels typically transition into trading ranges, the odds favor a rally and formation of a trading range on the daily chart.
