The EUR/USD currency pair remains one of the most actively traded instruments in the foreign exchange market, and recent price action has introduced a compelling signal following a bounce from a key technical support level at $1.1063. This level has proven to be a critical inflection point, providing an opportunity for traders to examine potential price action reversal signals and short-term directional biases.
The article by Raliplen presents a clear and thorough breakdown of the topic.
Market Context: US Dollar Strength and Technical Pressure
Over the past few sessions, EUR/USD has shown clear signs of bearish pressure, driven largely by renewed strength in the US Dollar. This shift came after a multi-week bullish stretch in the euro, which had seen the price flirt with yearly highs. However, recent macroeconomic developments and shifting interest rate expectations have tilted sentiment in favor of the greenback, leading to a retracement in the pair.
On Monday, the pair tested the $1.1063 level, a historically significant support zone. Price bounced slightly, respecting this level and pushing higher toward $1.1200, a psychologically important round number that acted as resistance. However, that bullish momentum appears to have stalled, suggesting that sellers are regaining control.
Importance of Price Action Signals at Key Levels
The best method to identify a classic “price action reversal” at key levels like $1.1063 is to closely observe the hourly candle closes. Traders should monitor for formations such as:
- Pin Bars: These candles feature long wicks and small bodies, typically signaling a rejection of lower (or higher) prices and a potential reversal. A bullish pin bar at support like $1.1063 often implies buyer interest.
- Doji Candles: Characterized by their narrow bodies and near-equal open and close, doji candles reflect market indecision. When they occur at support, they may precede a reversal, especially if followed by a stronger confirmation candle.
- Outside Bars: These candles engulf the previous bar’s range and demonstrate strong momentum. A bullish outside bar at support suggests aggressive buying.
- Engulfing Candles (with Higher Close): Bullish engulfing candles completely envelop the previous bearish candle and close higher, indicating a potential reversal in trend.
These patterns serve as confirmatory signals, especially when they occur around clearly defined support or resistance levels. The bounce from $1.1063 was accompanied by a modest reaction in price but lacked a strong bullish candle close, which raises caution about long positions unless stronger confirmation emerges.
Technical Analysis and Intraday Zones
From a technical standpoint, the chart structure indicates a bearish reversal setup below $1.1200, with the following levels being of high relevance:
- Key Support: $1.1063
This level serves as a crucial downside target and a potential floor for price action. A sustained break below $1.1063 could accelerate bearish momentum, opening the door for further declines toward deeper support zones. - Intermediate Support: ~$1.1140
Acting as a recent inflection point, this zone has seen a confluence of price reactions in the past. It may offer temporary relief for bulls on a pullback, but failure to hold here would add weight to the bearish outlook. - Immediate Resistance: $1.1200
This round-number level has emerged as a psychological barrier, capping recent bullish attempts. A confirmed rejection from this zone would reinforce the short-term bearish scenario, whereas a decisive breakout above could negate the reversal setup and shift sentiment in favor of buyers. - Next Resistance Zone: ~$1.1230–$1.1250
Should buyers manage to reclaim control and breach $1.1200, this broader resistance band will likely be the next key area of interest. This zone has previously acted as a distribution range, and traders will be closely watching for signs of supply re-emerging here.
If EUR/USD continues to trade below $1.1200, it validates the bearish outlook. The failure to sustain gains above this level reinforces it as a ceiling, inviting short-selling opportunities.
Conversely, a confirmed break and hourly close above $1.1200 would suggest a potential return of bullish momentum, targeting higher resistance levels. Still, traders should be cautious, as overhead resistance zones are tightly packed, which could limit upside potential.
Conclusion
The recent bounce from $1.1063 underscores its importance as a technical support level. However, without a decisive bullish follow-through, the overall bias remains bearish, especially below the $1.1200 resistance. Traders should focus on watching for reversal candlestick patterns around these levels to validate entries.
A price action-based approach—watching hourly closes for candlestick confirmation—remains one of the most effective tools for trading this setup. In the current environment, short trades below $1.1200 offer a better risk-reward profile, while any bullish breakout must overcome nearby resistance clusters to be sustained.
As always, risk management is critical. Traders should adjust position sizing based on volatility and protect entries with appropriate stop-loss orders, especially given how swiftly sentiment can shift in FX markets. The coming sessions will reveal whether $1.1063 holds or if bears will retest deeper support levels.
