EURUSD - Bullish Reversal Setup After Fair Value Gap MitigationMarket Overview:
EURUSD has experienced a strong bullish impulse, breaking through a key resistance level and forming a temporary top. Following this surge, price has started a corrective pullback within a descending channel, a structure often seen before a continuation in the dominant trend. The market appears to be in the process of mitigating a Fair Value Gap (FVG), which could provide an optimal area for bullish continuation.
Technical Insights:
- A significant support level was broken earlier, which later turned into a demand zone after the price surged. This confirms a shift in market structure towards bullish conditions.
- The ongoing correction is forming a descending channel, a classical bullish flag or wedge pattern, suggesting that once the corrective phase is over, buyers might step in to push the price higher.
- The FVG region below the current price aligns with key Fibonacci retracement levels, reinforcing the likelihood of a reaction from this zone. If price reaches this area and forms bullish confirmation patterns such as a bullish engulfing candle or a shift in order flow, it could signal the end of the correction and the beginning of another upward move.
Potential Scenario:
If price continues to decline and fills the FVG, traders should monitor for a reaction in this zone. A strong rejection from this level could lead to a bullish reversal, targeting previous highs and resuming the overall uptrend. The presence of a well-defined descending channel adds confluence to the bullish setup, as a breakout from this structure would further validate the expected upside movement.
Risk Considerations:
Traders should be cautious of any unexpected macroeconomic developments, such as central bank policy changes or geopolitical events, that could impact market sentiment. Additionally, waiting for confirmation in the FVG area is crucial to avoid premature entries and unnecessary exposure to risk.
Conclusion:
EURUSD is currently in a corrective phase after a strong bullish move, with price approaching a high-probability reversal zone. If the market responds positively to the FVG mitigation, there is a strong potential for a bullish continuation. Traders should remain patient and wait for confluence before making any trading decisions.
