EUR/USD: Traders Should Expect A 2-Month Rally To Start Soon

Today so far is a small bull day.  is in the middle of a 4-week tight trading range, so that means Breakout Mode. And since that trading range has been in a year long bear trend, a bear breakout is slightly more likely. Bears are looking for a bear breakout and resumption of year long bear trend. They then want a measured move down.

Next target for the bears is the June 19, 2020 higher low, which was the first pullback in last year’s strong rally. They then want the trend to continue down to below the bottom of the 7-year trading range. They have a 30% chance of achieving that before there is at least a 2-month rally.

Bulls want a 4-week tight trading range to form the base from which a rally back up to the middle of the 2021 bear trend takes off. They need consecutive bull bars closing near their highs and above the Nov. 30 high at the top of the 4-week tight trading range in order for that to happen.

If there is a bear breakout, it will probably fail within a few weeks and reverse up. Having a tight trading range late in a bear trend usually means its a Final Bear Flag.

The pair might reverse up from the double bottom with the June 19, 2020 low and a measured move down based on the height of the 4-week tight trading range.

Since the pair are in middle of a 7-year trading range, legs in trading ranges are often strong, but do not typically go from top to bottom without a bounce. That is why a 2-month rally is likely before the selloff breaks below the bottom of the 7-year trading range.

Traders should expect a 2-month rally to begin soon, either from the current 4-week tight trading range or from a reversal up from a break below the range (which would then be the Final Bear Flag).

Currency reversals have an increased chance of happening at the start of a year. The current bear trend began on Jan. 6. If there is going to be a reversal, traders might wait for early January.