EUR/USD 4H Timeframe Analysis

EUR/USD 4H Timeframe Analysis

Trend Analysis:
On the 4-hour timeframe, EUR/USD is in a major downtrend, with sellers dominating after breaking the significant key support level at 1.04300. This break allowed bearish momentum to push the price closer to the next minor key support at 1.01000.

However, buyers stepped in near this level, driving the price upward and forming higher highs and higher lows, indicating a potential reversal. The bullish momentum resulted in the break of the major key resistance at 1.04300.

Notably, a Head and Shoulders pattern has started to emerge after the breakout, strengthening the bias for a potential bullish shift. The price has now entered a phase of accumulation, gathering buy orders as it climbs toward the second minor resistance at 1.05000. After a minor breakout at this resistance level, the price retraced and retested the 1.04300 major key support, further validating its role as a support level.

Price Action Expectation:
Currently, the price is hovering within a liquidity zone, where it is expected to consolidate further. Our objective is to wait for the price to make another downward move, grabbing liquidity within this zone. Once liquidity is formed, we anticipate a bullish breakout, with the price moving back up to break the next minor resistance level.

Trade Setup
Trade Type: Buy Stop

Entry: 1.04620 (after price confirms upward momentum and breaks above the liquidity zone)
Stop Loss: 1.04090 (below the liquidity zone to protect against false breakouts)
Take Profit: 1.05990 (targeting the next minor key resistance level)
This setup leverages the Head and Shoulders pattern, the break of key levels, and liquidity zone dynamics to capture the next bullish move.

Fundamental Outlook
The EUR is supported by a cautiously optimistic outlook for the Eurozone, while the USD shows strength amid ongoing Federal Reserve monetary tightening. However, recent signs of stabilization in the Eurozone's economic performance could attract more buying interest for the EUR, especially at discounted levels.

Risk Management:
Risk-to-Reward Ratio: Maintain a 1:2+ risk-to-reward ratio for optimal returns.
Position Sizing: Adjust position sizes to match your risk tolerance and account equity.
False Breakout Caution: Monitor price behavior around the 1.05000 minor resistance level to avoid being caught in a false breakout.

Conclusion:
The EUR/USD setup is targeting a continuation of the bullish correction within the larger downtrend. The Head and Shoulders pattern forming after the breakout of 1.04300 further supports a potential bullish shift. This pattern, combined with the accumulation phase and liquidity zone dynamics, strengthens the probability of an upward breakout.

Once the price breaks through 1.05000, we anticipate strong momentum toward the 1.05990 target. This setup capitalizes on key technical signals while maintaining a sound risk-to-reward ratio, making it a high-probability trade idea.

Trading involves risks. Always ensure proper risk management and consult a financial professional when in doubt.