EUR/USD Outlook: The Bearish Flag Pattern at 1.18

Table of Contents

Euro Under Pressure Why the divergence between the Fed and ECB is pushing the Euro to new lows.

The Euro (EUR/USD) is currently trading heavily, struggling to maintain its footing above the 1.1800 level. The technical picture is painting a grim story for Euro bulls: a classic "Bearish Flag" formation has appeared on the 4-hour chart, signaling that the recent consolidation is likely just a pause before the next leg down.

While the US Federal Reserve remains hawkish due to high inflation data, the European Central Bank (ECB) is facing a stagnating German economy, leaving them with little room to hike rates further. This divergence is the fundamental fuel for the technical breakdown.

The Bearish Flag Setup

A Bearish Flag is a continuation pattern. It occurs when a sharp drop (the pole) is followed by a slight upward channel (the flag). A break below the lower channel line confirms the downtrend continues.

⚠️ Breakout Level: Watch 1.1790. A 4-hour close below this level validates the pattern and triggers sell orders targeting 1.1700.

Support & Resistance Levels

Level	Significance	Trader Bias
1.1943	Weekly Resistance	Strong Sell Zone
1.1850	Flag Top	Intraday Resistance
1.1765	Projected Target	Take Profit 1
1.1700	Psychological Support	Take Profit 2

Execution Strategy

📉 Sell Rallies Any bounce towards 1.1850-1.1880 should be viewed as a selling opportunity.

🛑 Invalidation If price breaks above 1.1950, the bearish structure is broken. Close shorts immediately.

📅 Event Risk Be careful during the upcoming ECB Lagarde speech; she could trigger a fake-out spike.

🔗 DXY Correlation Always check the Dollar Index. If DXY breaks 105.00, EUR/USD will likely collapse.

Conclusion

The path of least resistance for EUR/USD is lower. The combination of a strong technical pattern and weak fundamentals makes this one of the clearest setups of the week. Patience is key; wait for the flag to break before committing full size.

Prop Firm Tip: EUR/USD has the lowest spread on most modern platforms. Use this to your advantage for tighter stop losses.

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By: FXBonus Team