FX.co ★ Farhan Ali Shakir | EUR/USD

Market Analysis In the provided 1-hour chart of the EUR/USD forex pair, spanning from December 9 to December 12, 2025, the overall market sentiment appears bearish with intermittent bullish corrections. The price action initiates around the 1.1650 level, experiencing an initial dip before a notable upward surge that peaks near 1.1745. This rally is followed by a pullback and a subsequent attempt to retest highs, but it fails to breach previous peaks, forming a lower high around 1.1739. A prominent red downtrend line connects these highs, acting as dynamic resistance and reinforcing the bearish bias. The chart's vertical dashed lines likely mark session openings or key economic event times, such as European or U.S. market hours, which could influence volatility. Below the price chart, the RSI(14) indicator hovers around 55.88 at the latest candle, having oscillated between oversold (near 30) and overbought (approaching 70) territories. This suggests a market in consolidation after a period of momentum buildup, potentially influenced by macroeconomic factors like ECB policy hints or U.S. inflation data released around mid-December 2025. Liquidity seems concentrated around psychological levels like 1.1700, where price repeatedly bounces or reverses, indicating institutional interest. Overall, the chart depicts a ranging market within a downtrend channel, with potential for a breakdown if support at 1.1650 fails, or a breakout if resistance is overcome amid holiday-thin trading volumes. Price Action and Liquidity Focusing on price action, the EUR/USD exhibits classic swing patterns with clear impulse and corrective waves. Starting from the left, a series of red (bearish) candles dominate early, pushing price down to a low near 1.1645, followed by a bullish engulfing pattern that ignites a sharp rally. This upward move covers approximately 100 pips in a few hours, characterized by strong green candles with small wicks, signaling buyer conviction. However, as price approaches the downtrend line, selling pressure intensifies, leading to doji and spinning top candles that denote indecision. Liquidity analysis reveals key zones: the area between 1.1680 and 1.1720 acts as a liquidity pool, where stop-loss orders from retail traders might cluster above recent highs or below lows. The chart shows price sweeping through these levels, such as the spike low on December 9 and the false breakout on December 11, which could be engineered by smart money to grab liquidity before reversing. Volume isn't directly shown, but inferred from candle size—larger bodies during rallies suggest higher participation, possibly from algorithmic trading. In forex, liquidity is highest during London-New York overlaps, aligning with the chart's active periods around 14:00 UTC. The downtrend line, sloping gently downward, implies sellers are in control, but the flattening RSI hints at weakening momentum, potentially setting up for a liquidity grab at lower supports like 1.1620 if bearish continuation occurs. Candlestick Behavior and Confirmation Candlestick behavior in this chart provides critical insights into trader psychology and potential reversals. Early in the period, a cluster of bearish marubozu candles (full-bodied red) drive the price lower, confirming seller dominance with minimal upper wicks. This is interrupted by a hammer candle near the 1.1645 low, with a long lower shadow indicating rejection of further downside and foreshadowing the ensuing rally. The bullish phase features a sequence of ascending candles, including bullish harami patterns where a small red candle is engulfed by a larger green one, signaling a shift in momentum. At the peak, a shooting star candle emerges—characterized by a small body and long upper wick—warning of exhaustion as buyers fail to sustain highs against the trendline. Confirmation comes from multi-candle formations: for instance, a three-white-soldiers pattern during the rally adds bullish credence, while a subsequent evening star near 1.1740 validates the pullback. The RSI corroborates these: divergences appear where price makes higher highs but RSI forms lower highs around December 11, a classic bearish signal. Volume proxies via candle spreads show widening during confirmations, like the tight consolidation before breakouts. Traders should await closes below key candles or trendline breaks for confirmation, avoiding false signals in this choppy environment influenced by end-of-year positioning.

Trade Setup and Risk Management For a practical trade setup based on this chart, a short position could be initiated upon a confirmed break below the 1.1680 support, targeting the next liquidity zone at 1.1620, with a stop-loss above the recent high at 1.1740 to protect against whipsaws. Entry triggers might include a retest of the broken support as resistance, combined with a bearish candlestick like a pin bar. Alternatively, for bulls, a long setup awaits a decisive close above the downtrend line near 1.1745, aiming for 1.1800 with a stop below 1.1700. Position sizing should adhere to risk management principles: limit risk to 1-2% of account capital per trade, calculating lot sizes based on stop distance (e.g., for a 50-pip stop, adjust to fit risk tolerance). Use trailing stops, such as moving to breakeven after 30 pips profit, to lock in gains amid volatility. Diversify by correlating with USD strength indices or EUR-related news, like upcoming Fed decisions. Always incorporate the RSI for overbought/oversold filters—avoid shorts if RSI dips below 30 without divergence. In this 1H timeframe, combine with higher frames for confluence; a daily chart might show broader downtrend alignment. Psychological aspects matter: maintain a trading journal to review setups, and employ tools like ATR for realistic targets, ensuring expectancy remains positive over multiple trades. Conclusion In summary, the EUR/USD 1H chart illustrates a market grappling with bearish pressures amid fleeting bullish attempts, underscored by the downtrend line and RSI dynamics. Price action highlights liquidity hunts and reversal patterns, while candlesticks offer timely confirmations for entries. Effective trade setups demand disciplined risk management to navigate the inherent uncertainties of forex trading. Ultimately, this analysis underscores the importance of technical confluence in decision-making, reminding traders that no setup is foolproof without adapting to evolving market conditions. As we approach year-end 2025, external factors like geopolitical tensions or central bank shifts could amplify movements, emphasizing the need for vigilance and continuous learning in pursuit of consistent profitability.