19.12.202519:40 Forex Analysis & Reviews: EUR/USD. Smart Money. The Market Flared Up Quickly and Faded Just as Fast

The EUR/USD pair has started a corrective pullback and for the third consecutive day has been "assaulting" imbalance 9. Let me remind you that an imbalance zone is not only an area of interest for traders, but also, in a sense, a support zone. So far, however, we see neither a clear reaction to the imbalance nor its complete disregard. Trader activity is once again drifting toward zero. Thus, a new "bullish" signal that would allow traders to open new long positions may form, but I do not yet see a market reaction to the pattern. I would also remind you that I advised buying the euro from imbalance zones 3 and 8 as well, where "bullish" signals were also formed. As of now, those trades are showing a profit of about 170 points. If "bullish" imbalance 9 is not invalidated, traders may be able to count on significantly greater profits. However, each trader has the right to decide independently whether to keep an open long position.

The chart picture continues to signal "bullish" dominance. The "bullish" trend remains intact; a reaction to "bullish" imbalance 3 has been received, as has a reaction to "bullish" imbalance 8. Despite the fairly prolonged decline in the European currency, the dollar still failed to break the "bullish" trend. It had five months to do so—and achieved no result. Last week, a new "bullish" imbalance 9 was formed, which now acts as another area of interest and a support zone for the bulls. I would also like to remind once again that if "bearish" patterns appear or signs of a breakdown of the "bullish" trend emerge, the strategy can be adjusted. But at the moment, nothing points to that.

The news background on Friday was very weak, so I did not expect market activity. Indeed, there is no activity, and therefore no conclusions can be drawn. For now, one can only wait for a reaction to imbalance 9—or for its invalidation.

The bulls have had plenty of reasons for a renewed offensive for two months now, and all of them remain relevant. These include the "dovish" (in any case) outlook for FOMC monetary policy, Donald Trump's overall policy (which has not changed recently), the U.S.–China standoff (where only a temporary truce has been reached), protests against Trump (which have swept across America three times already this year), weakness in the labor market, the unpromising outlook for the U.S. economy (recession), and the government shutdown (which lasted a month and a half but was clearly not fully priced in by traders). Thus, in my view, further growth of the pair will be entirely natural.

One should also not lose sight of Trump's trade war and his pressure on the FOMC. Recently, new tariffs have been introduced less frequently, and Trump himself has stopped criticizing the Fed. However, I personally believe this is yet another "temporary calm." In recent months, the FOMC has been easing monetary policy, which is why there has been no new wave of criticism from Trump. But this does not mean these factors no longer pose problems for the dollar.

I still do not believe in a "bearish" trend. The news background remains extremely difficult to interpret in favor of the dollar, which is why I do not even try to do so. The blue line marks the price level below which the "bullish" trend could be considered complete. To reach it, the bears would need to push the price down by about 360 points, and they have been unable to cover a much shorter distance over the past few months. The nearest upside target for the European currency remains the "bearish" imbalance at 1.1976–1.2092 on the weekly chart, which was formed back in June 2021.

News Calendar for the U.S. and the Eurozone

On December 22, the economic calendar contains no entries of interest, and traders can already begin preparing for the New Year. The impact of the news background on market sentiment on Monday will be absent.

EUR/USD Forecast and Trading Advice

In my view, the pair may be in the final stage of the "bullish" trend. Despite the fact that the news background remains on the side of the bulls, it has been the bears who have attacked more often in recent months. Still, I do not currently see realistic reasons for the start of a "bearish" trend.

From imbalances 1, 2, 4, and 5, traders had opportunities to buy the euro. In all cases, we saw a certain degree of growth. Traders also had opportunities to open new trend-following long positions when a reaction to "bullish" imbalance 3 was received, as well as after the reaction to imbalance 8. The target for euro growth remains the 1.1976 level. Long positions can be kept open, with Stop Loss moved to breakeven. A new "bullish" imbalance 9 has also been formed, which may give traders a new "bullish" signal—but for now, there is no reaction.