After months of climbing within a rising wedge structure, EUR/USD has finally broken below its key bullish trend line, sending a clear signal that the prior uptrend may have come to an end. This technical shift is more than a minor pullback — it’s the first decisive violation of bullish momentum seen since the pair’s April lows. The break was marked by strong bearish displacement and has left behind an unfilled Fair Value Gap (FVG) on the daily chart — a magnet for price action and potential setup zone for smart money traders.
In this article, we’ll examine the technical breakdown in EUR/USD, identify confluence zones for short entries, analyze key downside liquidity objectives, and offer a strategy playbook for traders looking to capitalize on this shift. If you’ve been tracking the euro-dollar pair, this could be your window to catch the next leg of the move.
Trend Line Break: The Bullish Structure is Broken
The rising wedge, which had carried EUR/USD consistently higher for months, has now lost its footing. Price action decisively broke beneath the ascending trend line, signaling a loss of bullish control. This move wasn’t subtle — the breakdown occurred with momentum, forming a strong bearish candle that left a daily FVG unfilled just above the current price level.
This Fair Value Gap is now a technical magnet, offering a zone where price is likely to retrace before continuing its downward trajectory. It also coincides with the underside of the broken trend line, forming a powerful confluence zone — a textbook area where institutional traders may re-enter for short positions.
FVG and Trend Line Retest: Perfect Confluence for Shorts
As of writing, EUR/USD is hovering near 1.1570, consolidating below the broken trend structure. Directly above lies a clean FVG on the daily chart, sitting in the 1.1610–1.1640 range — just beneath the underside of the former trend line.
This zone is highly significant. A retracement into this area could provide a near-perfect setup for shorts. The combination of a bearish trend line retest and FVG fill offers the kind of confluence that institutional traders love: it gives them both justification and technical cover to initiate sell-side positions.
If price enters this zone and rejects it cleanly, we can expect continuation lower — possibly aggressive — toward the next liquidity pocket.
Sell-Side Liquidity Target: Below the May Swing Low
The major downside target for this setup sits below the swing low from early May. This area likely holds a large accumulation of resting sell-side liquidity, making it a prime target for smart money.
The logic is simple: after breaking a key trend structure, institutions often look to exploit trapped buyers and sweep key lows to grab liquidity. That makes the area below 1.10500 the next likely objective — particularly if the FVG rejection plays out as expected.
What Would Invalidate the Bearish Bias?
Though the outlook is bearish, traders should remain agile. The area below the May low is not only a target — it’s also a potential reversal zone.
If price sweeps that low and immediately begins to form bullish structure (higher highs and higher lows on short timeframes), that could signal accumulation. A sharp bounce with strong bullish displacement and reclaiming of broken levels would be early signs of a trend shift. Until that occurs, the bearish bias remains firmly intact.
Execution Plan: Strategy for the Retracement Short
Here’s how traders can approach this setup:
- Watch for Retrace into the FVG Zone (1.1610–1.1640): This zone overlaps with the underside of the broken trend line.
- Look for Bearish Confirmation on Lower Timeframes (1H or 15M): Patterns like bearish engulfing candles, break of market structure, or liquidity sweeps followed by rejections.
- Entry: After confirmation within the FVG zone.
- Stop-Loss: Just above the swing high prior to the breakdown.
- Target: Below the May swing low — around 1.10500.
This trade setup offers a high reward-to-risk ratio if executed patiently with confirmation.
Conclusion
EUR/USD has officially transitioned from a bullish to bearish market structure after breaking its long-standing ascending trend line. With an unfilled daily Fair Value Gap sitting above and a major liquidity target below, this presents a well-defined shorting opportunity for traders. The FVG and trend line retest zone offers the highest-probability entry. If price rejects this area and confirms on lower timeframes, expect a move toward the 1.10500 zone.
As always, risk management and patience are key. This is a setup you don’t want to miss — but only if the market gives you the right entry.
FAQs
Q1: What does it mean when EUR/USD breaks a trend line? A: It signals a potential shift in market structure. In this case, breaking the bullish trend line indicates a loss of upward momentum and possible beginning of a bearish trend.
Q2: What is a Fair Value Gap (FVG)? A: An FVG is an area where price moved too quickly, leaving a gap or inefficiency. Price often retraces to these zones before continuing in the original direction.
Q3: Why is the FVG and trend line retest zone important? A: It offers a confluence of resistance where institutions may enter short positions. This makes it a high-probability zone for reversals.
Q4: Where is the main downside target? A: The key target lies below the May swing low, near 1.10500 — a likely area of resting sell-side liquidity.
Q5: What would invalidate the bearish outlook? A: A strong bullish reversal that reclaims the FVG zone and breaks above the recent swing highs could signal a return to bullish structure.
Disclosure: I am part of Trade Nation’s Influencer program and receive a monthly fee for using their TradingView charts in my analysis. This article is for educational purposes only and does not constitute financial advice. Trading involves risk. Always do your own research before making trading decisions.