The relationship between Fibonacci Retracement and market structure lies in how prices move, pause, and continue within trends. Market structure refers to the sequence of higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend. Fibonacci Retracement helps traders measure how deep a pullback goes within that structure.

In a healthy uptrend, the price usually retraces to key Fibonacci levels such as 38.2%, 50%, or 61.8% before forming a higher low and continuing upward. These retracement levels often align with previous structure points like prior highs, lows, or consolidation zones. When Fibonacci levels and market structure overlap, they create high-probability support or resistance areas.

In a downtrend, Fibonacci Retracement is drawn from the swing high to the swing low. Price often pulls back toward Fibonacci resistance levels before forming a lower high and resuming the downward move. This helps traders identify continuation entries rather than trading against the trend.

Fibonacci Retracement does not replace market structure. It works best as a confirmation tool. Market structure defines the trend direction, while Fibonacci levels highlight potential reaction zones within that trend. When price action confirms these zones through rejection or reversal patterns, trade setups become clearer and more controlled.