reversed sharply against major resistance this week, with a confirmed change in market structure on the daily time frame accelerating downward pressure. The bears threaten to resume the broader downtrend as the confluence of multiple time frames aligns to the downside.
EUR/USD has been carving a well-defined channel on the weekly chart and once again, the price has failed to overcome the key resistance at the upper boundary.
EUR/USD has been carving a well-defined channel on the weekly chart and once again, the price has failed to overcome the key resistance at the upper boundary.
A shooting star candle on the weekly chart, printed directly in the imbalance zone, indicates a very likely change in the directional bias to the downside.
Price is retesting a previous support level on the 4-hour chart that has turned into resistance, converging with Fibonacci retracement levels, offering a possible short entry setup.
Weekly Schedule: The Big Picture
EUR/USD has been carving a well-defined channel on the weekly chart and once again, the price has failed to overcome the key resistance at the upper boundary. This is not the first rejection from this area: repeated failures at the same level indicate the presence of aggressive institutional sellers who defend that region with conviction.
The rejection formed a textbook shooting star candle directly inside an imbalance zone. For context, imbalance zones are regions where unilateral order flow was so aggressive that the market left a structural void; These areas act like magnets, pulling the price back before frequently triggering strong reversals. That is precisely what happened here. With the Shooting Star printed in resistance and within an imbalance zone, the weekly time frame now indicates a high probability change in the directional bias to the downside.
Weekly Schedule: The Big Picture
Moving down to the daily chart, the weekly signal receives a clear and decisive confirmation. A change in market structure has been established: the previous sequence of higher highs and lower lows that defined the uptrend has been broken, and the price is now beginning to form a structure of lower highs and lower lows consistent with a trend reversal.
Two additional technical developments reinforce this bearish reading. First, a retracement towards the Fibonacci golden zone (the 61.8% to 78.6% retracement corridor) was met with a decisive rejection. This is the area where institutional participants historically re-enter the direction of the dominant trend, and the failure to recover confirms that the smart money is still positioned on the short side. Second, the price has fallen below the 200-day simple moving average, a widely followed institutional benchmark that separates long-term bullish and bearish regimes. With the price now below this level, the daily bias is unequivocally bearish, and the path of least resistance points towards lower support levels within the developing bearish channel.
4 hour time frame: configuration in focus
The 4-hour chart narrows the picture to where active trading management begins. The internal structure here reflects the higher time frames: the price is trending within a bearish channel, having already broken below its own 200 SMA, confirming that the bearish narrative is consistent from macro to micro.
Currently, the price is retesting a former support level that has since become resistance – a classic support turned resistance or swing zone. What makes this level particularly significant is its confluence: the reversal zone lies at the intersection of the descending channel's resistance line, a previous high, and a Fibonacci retracement level. When three independent technical factors converge in the same price region, the quality of any reaction from that area is significantly high.
The scenario being monitored is a continued pullback towards this resistance group, followed by a bearish confirmation signal (a bearish engulfing formation, Pin Bar or lower high) before continuing lower. However, a clear break above the swing zone without rejection would require a reassessment of the short-term bearish bias.
Macroeconomic context: headwinds that reinforce the disadvantage
The technical outlook is well supported by the macroeconomic context. US CPI for April was 3.8% year-on-year (the highest since May 2023), with core inflation rising to 2.8% and housing costs posting their biggest monthly increase since September 2023. Inflationary pressures are clearly widening beyond the energy shock, effectively eliminating any chance of rate cuts by the Federal Reserve through the end of 2027 and pricing in a nearly one-in-three chance of a full increase by December 2026. Higher for longer US rates remain structurally bullish for the dollar.
On the euro side, the ECB kept rates at 2% at its April 30 meeting, but sharpened its warnings about inflation. While money markets are fully pricing in at least two ECB rate hikes before the end of the year, the ECB faces a difficult trade-off: Rising energy costs are simultaneously raising inflation and hampering eurozone growth. A central bank forced to take restrictive measures in a slowing economy limits the euro's ability to benefit from any rally cycle, keeping the fundamental bias tilted in favor of the dollar.
Conclusion
The convergence of the technical and the macro is rarely so well aligned. EUR/USD recorded a weekly shooting star rejection at major resistance, broke the 200 SMA, confirmed a change in market structure on a daily basis, and was rejected from the golden Fibonacci zone, all of which produced a consistent bearish channel on the weekly, daily, and 4-hour time frames.
The immediate focus is on the 4-hour reversal zone: a clear rejection here opens the door towards the 1.1578/98 support region, with a break below the 1.1495 target and eventually the broader 1.1355/94 zone. However, a weekly close above 1.1746/75 would materially weaken the bearish case and warrant a complete re-evaluation.
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This analysis is intended for educational purposes only and does not constitute financial advice. All trading involves risk.
