EURUSD - EURUSD – The Calm Before the SweepAfter months of climbing steadily within a rising wedge structure, EURUSD has finally broken beneath the bullish trend line that previously acted as dynamic support. This shift is significant, as it marks the first decisive violation of the bullish momentum that has carried price from the April lows into the July highs. The break occurred with strong bearish displacement, leaving behind an unfilled daily Fair Value Gap (FVG) just above the current price. This area now acts as a potential magnet for price before continuation lower.
Trend Line Retest and FVG Confluence
Price is currently hovering near 1.1570 after the trend line break. Above, we have a clean FVG on the daily chart which aligns closely with the underside of the broken trend line. A retracement into this zone would offer the ideal setup for short positioning, combining the concept of a bearish retest with inefficiency fill. From a technical perspective, this would give institutions a perfect level to engineer a lower high before continuing the move down.
Sell-Side Liquidity Objective
The major downside target sits below the swing low formed in early May. This area likely holds a large pool of resting sell-side liquidity, which would be an ideal draw for smart money before any potential reversal. If the market respects the bearish structure and rejects the FVG zone cleanly, the move toward this liquidity pocket becomes increasingly probable.
Reversal Conditions
While the short setup is currently the main focus, the area below the May low also presents a key decision point. If price sweeps that low and we begin to see bullish structure return, this could mark the beginning of a new leg up. For that to be valid, we’d need to see signs of strong buying interest, displacement, and reclaim of key short-term highs. Until then, we remain on the lookout for short opportunities into the FVG and trend line retest zone.
Execution Plan and Expectations
Traders should watch for signs of exhaustion or rejection once price enters the FVG zone. Bearish price action on lower timeframes like the 1H or 15M could confirm entry, particularly if the trend line holds as resistance. Stops can be placed above the swing high before the break, with targets below the major low around 1.10500. The reward-to-risk on this setup is favorable, but patience is needed to wait for the retrace to complete.
Conclusion
EURUSD has shifted from bullish to bearish structure after breaking the rising trend line. With an unfilled FVG above and a clean downside liquidity target, this setup offers a well-defined short opportunity. Reactions at the FVG and below the May low will dictate whether we extend lower or begin a new bullish phase. For now, all eyes are on the retrace and short continuation.
Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analysis.
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