20.03.202620:39 Forex Analysis & Reviews: EUR/USD. Smart Money. Upward movement is still unlikely

After a slight rise, the EUR/USD pair is once again showing an inability to continue higher. On Wednesday, at the close of the day, a sell signal was formed within imbalance 12, but the very next day bulls sharply pushed higher, driving the price above imbalance 12. The imbalance itself was not invalidated, but it can no longer be considered a reliable signal. As already noted, the euro showed strong growth on Thursday, followed by another decline on Friday. Thus, the price may react again to imbalance 12 and resume the overall downward movement. Personally, I do not favor such signals and sharp price swings. However, it should be understood that three central bank meetings took place this week, which led to a generally expected reaction from traders.

A new sell signal has formed this week, which—given the potential breakdown of the bullish trend—could push the euro significantly below the 1.1400 level. However, this scenario will only become convincing if geopolitical factors continue to strongly support the bears. As previously mentioned, this would require the situation in the Middle East not just to remain tense, but to worsen further. Oil prices would need to continue rising, more countries would need to become involved in the conflict, and the economies of developed nations would need to be seriously affected. The conflict itself would also need to last for many months. While such conditions were previously unlikely, negative news from the Middle East continues to emerge. Therefore, further decline in EUR/USD cannot be ruled out.

There are currently no new patterns for opening positions. Traders holding short positions are advised to wait. Either imbalance 12 will be invalidated—opening the way for a bullish move—or the decline will continue in line with the existing sell signal and the breakdown of the bullish trend. The ECB meeting this week supported the bulls, but not enough to sustain momentum beyond a single day.

The overall chart still suggests bullish dominance. The bullish trend remains technically intact, but bulls are currently in a difficult position due to rapidly changing news flow. Opening new buy positions would require new bullish patterns or at least a liquidity sweep of the last two bearish swing lows. However, a liquidity sweep alone is not a trading pattern and cannot be used as a standalone entry signal.

The news background on Friday was effectively absent, yet bears resumed selling. If this is simply a correction following Thursday's rally, it is not surprising. If Thursday's move was the correction instead, then the situation becomes clearer, as there is an existing sell signal. The chart setup remains uncertain, and the news background could push the euro in either direction.

Bulls still have many fundamental reasons to push higher, and even the Middle East conflict has not reduced them. Structurally and globally, Trump's policies—which led to a significant decline in the dollar last year—have not changed. In the near term, the U.S. dollar may strengthen due to risk aversion, but this factor is unlikely to provide sustained support. Other strong supporting factors for the dollar are lacking.

I still do not believe in a sustained bearish trend. The dollar has received temporary support, but it is unclear how long this will last. However, the bullish trend has been damaged, and this must be acknowledged. There is still a chance for a liquidity sweep and a trend recovery, but geopolitical factors continue to weigh heavily on EUR/USD.

News Calendar for the U.S. and the Eurozone:

On March 23, the economic calendar contains no significant entries. The news background is not expected to influence market sentiment on Monday.

EUR/USD Forecast and Trading Advice:

In my view, the pair remains in the process of forming a bullish trend. The news background shifted sharply two weeks ago, but the trend itself cannot yet be considered fully canceled. Therefore, traders need new patterns and signals to form short-term forecasts.

At present, bears have received a signal within imbalance 12, and since the bullish trend is close to breaking, this signal should be taken seriously. Bulls, meanwhile, can only hope for a liquidity sweep below the 1.1470 and 1.1392 lows, followed by the invalidation of imbalance 12, the formation of bullish patterns, and new buy signals.