FX.co ★ Farhan Ali Shakir | EUR/USD

Market Analysis On the EURUSD H1 chart, the dominant structure is bearish: price prints a clear sequence of lower highs and lower lows, reinforced by a descending trendline that has capped multiple recovery attempts. Each rebound into the trendline zone fails to transition into sustained upside follow-through, suggesting sellers remain in control and buyers are mostly short-term participants taking quick profits. Momentum also supports this view: the RSI(14) is around 39, which is below the midline and consistent with a market that is trending down rather than consolidating neutrally. Importantly, the decline is not a straight drop; it’s a “sell–pause–sell” pattern, where the pauses represent temporary balancing before the next push lower. This type of behavior often appears when larger participants distribute risk gradually, using pullbacks to reload positions rather than chasing price. Overall, the context favors sell-side positioning until price proves otherwise by breaking the descending trendline and holding above the most recent lower high. Price Action and Liquidity Liquidity in this chart is most likely concentrated above obvious swing highs and around the descending trendline, because those areas attract clustered stop-losses from short sellers and breakout orders from late buyers. Price repeatedly moves up into these zones, draws in orders, and then reverses—classic behavior when the market seeks liquidity before continuing in the prevailing direction. On the downside, liquidity builds below prior lows and under round-number or visually “clean” support levels, where buyers place stops and sellers place take-profit orders. The sharp dip and rebound near the right side of the chart suggests a liquidity sweep: price presses into a previous low area, triggers stop orders, and then snaps back as selling pressure temporarily exhausts. However, a single rebound does not automatically imply a reversal; in downtrends, these bounces often serve as corrective pullbacks that later provide better selling prices. The key read is that the market appears to be using both sides of liquidity—sweeping below lows to fuel short-covering and then offering pullbacks into resistance to re-engage sellers. Candlestick Behavior and Confirmation Candlestick behavior in a downtrend is best interpreted through rejection and follow-through. When price rallies into the trendline, bearish confirmations typically include long upper wicks (showing rejection), bearish engulfing candles, or strong-bodied red candles that close near their lows. These patterns signal that buyers attempted to push higher but were absorbed by sell orders, often from participants defending the trendline or a supply zone. Conversely, bullish candles near the lows—especially those with long lower wicks—can indicate sellers are taking profit and that downside momentum is pausing. In the image, the late-stage rebound after a sharp dip hints at short-term demand, but confirmation requires more than one candle: traders usually look for a break above the immediate minor high of the rebound, followed by a retest that holds. If that confirmation fails and price prints a lower high with bearish rejection near the trendline, it strengthens the probability of trend continuation. In short, the best confirmation here is not “a green candle,” but a sequence: rejection at resistance for sells, or break-and-hold above structure for a true reversal.

Trade Setup and Risk Management A practical setup aligned with the chart is a trend-continuation short. The idea is to wait for a pullback toward the descending trendline or a recent lower-high area, then enter on bearish confirmation (for example, a rejection wick followed by a strong bearish close). The stop-loss can be placed above the trendline and above the rejection swing high, so the trade is invalidated if price genuinely breaks structure. Targets can be staged: first at the most recent swing low (where partial profits reduce risk), then at the next lower support area if momentum persists. If price instead sweeps a low and rebounds strongly, an alternative plan is to avoid selling into the bounce and wait for the market to show whether it forms a lower high (sell continuation) or breaks the descending structure (reversal scenario). Risk management should be rule-based: limit risk per trade (commonly 0.5%–2% of account equity), maintain a minimum reward-to-risk profile (e.g., 1.5R or 2R), and avoid widening stops after entry. Because EURUSD can accelerate quickly during session overlaps or news, position sizing should account for volatility; tighter stops require smaller size only if the setup logic still makes sense, not because the trader wants larger profit. Conclusion This EURUSD H1 snapshot presents a market that is structurally bearish, with price respecting a descending trendline and RSI holding below the midline—both signs of persistent sell-side control. Liquidity appears to be engineered around obvious highs (above trendline touches) and obvious lows (below prior supports), with sharp moves that resemble stop runs and re-accumulation of positions. Candlestick confirmation is essential: rejection at resistance favors continuation shorts, while genuine reversal requires a break above key structure and a hold on retest, not just a temporary bounce. A disciplined trade plan focuses on selling pullbacks with clear invalidation and staged profit-taking, while managing risk through fixed percentage exposure and realistic reward-to-risk expectations. Overall, the highest-probability approach is to respect the trend until the chart clearly changes character—meaning it stops making lower highs and begins holding above former resistance with strong follow-through.