EUR/JPY – Rising Wedge Breakdown Signals Bearish Reversal
Timeframe: 45-Minute Chart (OANDA)
Pattern: Rising Wedge → Bearish Reversal
Date: May 4, 2025
Current Price: ~163.64
Market Bias: Bearish (short-term)
🧠 Technical Overview:
The EUR/JPY pair recently formed a Rising Wedge pattern, a well-known bearish reversal formation that occurs after a bullish trend. This pattern suggests exhaustion in buying momentum and typically precedes a trend reversal or correction.
🔷 Pattern Description: Rising Wedge
Structure: Two converging trendlines sloping upward.
Psychology: Bulls remain in control but are losing steam. Each higher high is weaker, and buyers are unable to sustain upward momentum.
Breakdown: A decisive break below the lower trendline signals potential for a strong bearish move.
📊 Key Chart Elements:
🔹 Support Zone (~162.40–162.50):
This is the base of the wedge and an important historical support level.
Also acts as the measured target based on the height of the wedge.
🔹 Resistance Zone (~164.80–165.15):
Marked by repeated price rejections.
Final swing high confirms the pattern's upper boundary before the breakdown.
🔹 Breakout & Retest:
The price broke down below the lower wedge support.
There was a retest of the broken trendline, followed by a bearish continuation.
This retest confirms the validity of the breakout and increases the probability of downside continuation.
📌 Trade Setup:
Component Level Rationale
Sell Entry Below 163.65 Confirmed breakdown of wedge
Take Profit (TP) 163.038 Intermediate pullback level
Final Target 162.431 Support zone & wedge height projection
Stop Loss (SL) 165.149 Above wedge resistance and prior swing high
📈 Price Projection Logic:
Measured Move: The height of the wedge (~70–80 pips) is projected downward from the breakdown point.
The final target (162.431) aligns with prior support and the projected move, providing a logical exit for short positions.
📉 Sentiment & Market Context:
Bearish Divergence: Although not shown in the chart, rising wedge formations are often accompanied by bearish RSI or MACD divergence. This may be present.
Risk-Off Flows: If broader market sentiment turns risk-off (e.g., due to geopolitical or economic news), JPY could strengthen, supporting the bearish move in EUR/JPY.
No Major Support Until 162.40: This gives the trade room to run with minimal interference.
⚠️ Risk Management:
Use tight risk control; ensure stop-loss is in place to prevent exposure if the pattern fails.
Avoid entering prematurely—wait for confirmed close below TP zone or retest failure.
Ideal risk-reward ratio exceeds 1:2 if executed correctly.
📌 Conclusion:
The EUR/JPY pair has broken down from a Rising Wedge pattern, signaling a shift in short-term momentum from bullish to bearish. With the breakdown and retest confirmed, the pair is expected to target the 162.431 support level in the coming sessions. This setup offers a textbook technical entry for traders favoring pattern-based strategies, supported by clear structure, defined risk, and a logical target path.
Timeframe: 45-Minute Chart (OANDA)
Pattern: Rising Wedge → Bearish Reversal
Date: May 4, 2025
Current Price: ~163.64
Market Bias: Bearish (short-term)
🧠 Technical Overview:
The EUR/JPY pair recently formed a Rising Wedge pattern, a well-known bearish reversal formation that occurs after a bullish trend. This pattern suggests exhaustion in buying momentum and typically precedes a trend reversal or correction.
🔷 Pattern Description: Rising Wedge
Structure: Two converging trendlines sloping upward.
Psychology: Bulls remain in control but are losing steam. Each higher high is weaker, and buyers are unable to sustain upward momentum.
Breakdown: A decisive break below the lower trendline signals potential for a strong bearish move.
📊 Key Chart Elements:
🔹 Support Zone (~162.40–162.50):
This is the base of the wedge and an important historical support level.
Also acts as the measured target based on the height of the wedge.
🔹 Resistance Zone (~164.80–165.15):
Marked by repeated price rejections.
Final swing high confirms the pattern's upper boundary before the breakdown.
🔹 Breakout & Retest:
The price broke down below the lower wedge support.
There was a retest of the broken trendline, followed by a bearish continuation.
This retest confirms the validity of the breakout and increases the probability of downside continuation.
📌 Trade Setup:
Component Level Rationale
Sell Entry Below 163.65 Confirmed breakdown of wedge
Take Profit (TP) 163.038 Intermediate pullback level
Final Target 162.431 Support zone & wedge height projection
Stop Loss (SL) 165.149 Above wedge resistance and prior swing high
📈 Price Projection Logic:
Measured Move: The height of the wedge (~70–80 pips) is projected downward from the breakdown point.
The final target (162.431) aligns with prior support and the projected move, providing a logical exit for short positions.
📉 Sentiment & Market Context:
Bearish Divergence: Although not shown in the chart, rising wedge formations are often accompanied by bearish RSI or MACD divergence. This may be present.
Risk-Off Flows: If broader market sentiment turns risk-off (e.g., due to geopolitical or economic news), JPY could strengthen, supporting the bearish move in EUR/JPY.
No Major Support Until 162.40: This gives the trade room to run with minimal interference.
⚠️ Risk Management:
Use tight risk control; ensure stop-loss is in place to prevent exposure if the pattern fails.
Avoid entering prematurely—wait for confirmed close below TP zone or retest failure.
Ideal risk-reward ratio exceeds 1:2 if executed correctly.
📌 Conclusion:
The EUR/JPY pair has broken down from a Rising Wedge pattern, signaling a shift in short-term momentum from bullish to bearish. With the breakdown and retest confirmed, the pair is expected to target the 162.431 support level in the coming sessions. This setup offers a textbook technical entry for traders favoring pattern-based strategies, supported by clear structure, defined risk, and a logical target path.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.