EURUSD - Will Bears Keep Pushing Lower?Overview of Market Structure
The EUR/USD pair has been experiencing strong bullish momentum over the past few weeks, leading to the creation of an extended bullish leg. However, as with most impulsive moves, the market has left behind imbalances—price inefficiencies where the market moved too quickly without sufficient pullbacks to ensure order fulfillment.
Recently, we have observed a break in bullish structure, signaling a potential shift in momentum. This break suggests that the market may now be in a phase where it seeks to rebalance inefficiencies before deciding its next directional move.
My expectation is that price will first retrace to fill the imbalance zone above, which acts as a supply area, before reversing and targeting the imbalance zones left behind in the bullish rally.
Key Resistance and Market Rejections
A crucial area in this setup is the strong resistance zone (marked in red), which has been rejected twice. Each time price attempted to break through, sellers stepped in, pushing price lower. This level serves as a significant supply zone where institutions may have unfilled sell orders.
With this in mind, the most logical movement for price would be to return to this area, collect liquidity, and then initiate a bearish move.
Imbalance Zones and Market Efficiency
Imbalance zones are areas on the chart where price has moved too quickly, leaving behind inefficiencies. These areas often get revisited later as price seeks to rebalance liquidity.
There are two key imbalance zones in this setup:
The imbalance zone above the current price (first target) – This is the area where price is expected to retrace before reversing.
The imbalance zone below the current price (final target) – Created during the rapid bullish rally, this area remains untested and is likely to be filled once bearish momentum takes over.
These zones are high-probability areas where price is expected to react due to unfulfilled institutional orders.
Break of Bullish Structure & Shift in Momentum
A key element of this trade idea is the break in bullish structure. This break was confirmed when a bearish candle closed below the previous higher low, invalidating the uptrend.
This structural shift suggests that bulls may be losing control, and a deeper retracement is likely before any potential continuation of the overall trend. The break also increases the probability of the lower imbalance zone getting filled before the market makes its next major move.
Trade Execution Plan
Step 1: Identify the Optimal Short Entry
Wait for price to fill the imbalance zone above.
Once confirmation is seen, a short position can be entered.
Step 2: Bearish Move to Lower Imbalance Zone
After rejection from the supply zone, expect price to break lower.
The target for this move will be the imbalance left behind in the bullish rally.
Trailing stop-loss can be used to maximize profits while reducing risk.
Why This Trade Has High Probability
Market Favors Liquidity Grabs – The imbalance zone above is a likely liquidity grab area before the bearish move.
Break in Market Structure – The recent bearish structure break increases the probability of downside continuation.
Historical Resistance Rejection – The resistance zone above has already rejected price twice, indicating strong selling pressure.
Imbalance Fill Below – Price tends to fill inefficiencies left behind in fast-moving markets, making the lower imbalance zone a logical target.
Risk Management Considerations
Stop-loss should be placed slightly above the imbalance zone above to protect against unexpected breakouts.
Take-profit should be set at the lower imbalance zone, allowing for a strong risk-to-reward ratio.
If price breaks past the resistance zone above without rejection, it would invalidate this bearish setup, signaling a reevaluation of market conditions.
Conclusion
This trade idea is based on a smart money concept (SMC) approach, focusing on liquidity grabs, imbalance fills, and structural shifts. If the market follows the expected path, we could see price first push up to fill the imbalance above, reject from that level, and then begin a bearish move to fill the imbalance left in the previous bullish rally.
By patiently waiting for price to reach key areas and confirming rejections, this trade setup provides a high-probability opportunity with a strong risk-to-reward ratio.
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