A very promising bearish setup has emerged on EUR/USD, aligning with the prevailing downtrend. The currency pair initially staged a bullish advance, but this move now appears to have been a false breakout, reinforcing the broader bearish sentiment in the market.
The price action formed a flag pattern, marked with green lines, which represents a bullish correction within a bearish trend. However, instead of confirming an upward breakout, the flag ended with a double top formation, highlighted in yellow. This double top coincided with a false breakout above the orange horizontal resistance, adding further weight to the bearish outlook.
With the price now back below resistance and having broken the lower boundary of the flag, the sell signal is confirmed. The next logical target for this move is the lows from early January, making this a well-structured trade in terms of risk-to-reward ratio.
As long as EUR/USD remains below the broken flag support and resistance zone, the bearish scenario remains valid. A strong rejection or consolidation above the resistance would be the only factor that could negate this setup. For now, the downside momentum looks set to continue.