EUR/JPY Daily Chart – Rising Wedge Pattern Suggests Bearish Reversal Ahead
🔍 Market Context & Structure
The EUR/JPY pair has been consolidating within a rising wedge formation on the daily chart — a pattern that often precedes bearish reversals. This technical setup has developed after a strong rally off the March 2025 lows, with price pushing toward a well-defined resistance zone.
Price action has been making higher highs and higher lows, but the slope of the highs is flattening, while lows are rising more steeply — forming a rising wedge.
The wedge terminates just beneath a key resistance zone around 164.50–165.00, which has historically acted as a ceiling for price (see October 2024 and March 2025).
Momentum is showing signs of slowing down, which reinforces the case for a potential reversal.
📐 Technical Pattern: Rising Wedge
Rising wedges are bearish reversal patterns, especially effective when appearing near major resistance or after a strong uptrend.
Upper Trendline: Connects recent highs with diminishing momentum.
Lower Trendline: Steep support line connecting recent higher lows.
The wedge’s narrowing structure indicates a potential exhaustion of buying power and increasing vulnerability to a breakdown.
📊 Key Zones and Levels
🔹 Resistance Zone: 164.50 – 165.00
Rejected multiple times; where the wedge peaks.
🔹 Support Zone (Target): 154.85
Previous demand zone and structure base; likely to attract buyers if price reaches.
🔹 TP (Take Profit): Around 159.00
Mid-range support, and likely first reaction area on a drop.
🔹 SL (Stop Loss): 167.99
Above the most recent swing high — invalidates the pattern if broken.
📈 Bearish Trade Setup
This is a swing short setup with a favorable risk-reward profile based on the wedge breakdown hypothesis.
🛠️ Trade Plan:
Entry Trigger:
Look for a clean daily close below the wedge support (trendline break), ideally with increasing volume and/or a bearish engulfing candle.
Optional Conservative Entry:
Enter on the pullback to the broken support trendline or the resistance zone, confirming the new lower high.
🎯 Targets:
TP1: 159.00 – first major structure level.
TP2 (Final Target): 154.85 – previous swing low and support zone.
🚫 Stop-Loss:
Set above the wedge resistance at 167.99, giving the trade breathing room while protecting against invalidation.
⚖️ Risk-Reward Profile:
Assuming entry near 163.50:
TP1: ~450 pips
TP2: ~850+ pips
SL: ~450 pips
🟩 Potential R:R of 1:1 to 1:2, depending on entry and target levels.
🔄 Alternative Scenario (Invalidation):
If price breaks above 167.99 and holds above the resistance zone, the wedge pattern is invalidated.
This could signal a continuation toward the 170.00 psychological level.
🧠 Final Notes & Considerations:
Always wait for confirmation before entering.
Monitor fundamental drivers — especially ECB and BoJ policy decisions or economic data — as they may impact volatility.
Rising wedges can sometimes produce false breakouts, so manage risk appropriately.
🔍 Market Context & Structure
The EUR/JPY pair has been consolidating within a rising wedge formation on the daily chart — a pattern that often precedes bearish reversals. This technical setup has developed after a strong rally off the March 2025 lows, with price pushing toward a well-defined resistance zone.
Price action has been making higher highs and higher lows, but the slope of the highs is flattening, while lows are rising more steeply — forming a rising wedge.
The wedge terminates just beneath a key resistance zone around 164.50–165.00, which has historically acted as a ceiling for price (see October 2024 and March 2025).
Momentum is showing signs of slowing down, which reinforces the case for a potential reversal.
📐 Technical Pattern: Rising Wedge
Rising wedges are bearish reversal patterns, especially effective when appearing near major resistance or after a strong uptrend.
Upper Trendline: Connects recent highs with diminishing momentum.
Lower Trendline: Steep support line connecting recent higher lows.
The wedge’s narrowing structure indicates a potential exhaustion of buying power and increasing vulnerability to a breakdown.
📊 Key Zones and Levels
🔹 Resistance Zone: 164.50 – 165.00
Rejected multiple times; where the wedge peaks.
🔹 Support Zone (Target): 154.85
Previous demand zone and structure base; likely to attract buyers if price reaches.
🔹 TP (Take Profit): Around 159.00
Mid-range support, and likely first reaction area on a drop.
🔹 SL (Stop Loss): 167.99
Above the most recent swing high — invalidates the pattern if broken.
📈 Bearish Trade Setup
This is a swing short setup with a favorable risk-reward profile based on the wedge breakdown hypothesis.
🛠️ Trade Plan:
Entry Trigger:
Look for a clean daily close below the wedge support (trendline break), ideally with increasing volume and/or a bearish engulfing candle.
Optional Conservative Entry:
Enter on the pullback to the broken support trendline or the resistance zone, confirming the new lower high.
🎯 Targets:
TP1: 159.00 – first major structure level.
TP2 (Final Target): 154.85 – previous swing low and support zone.
🚫 Stop-Loss:
Set above the wedge resistance at 167.99, giving the trade breathing room while protecting against invalidation.
⚖️ Risk-Reward Profile:
Assuming entry near 163.50:
TP1: ~450 pips
TP2: ~850+ pips
SL: ~450 pips
🟩 Potential R:R of 1:1 to 1:2, depending on entry and target levels.
🔄 Alternative Scenario (Invalidation):
If price breaks above 167.99 and holds above the resistance zone, the wedge pattern is invalidated.
This could signal a continuation toward the 170.00 psychological level.
🧠 Final Notes & Considerations:
Always wait for confirmation before entering.
Monitor fundamental drivers — especially ECB and BoJ policy decisions or economic data — as they may impact volatility.
Rising wedges can sometimes produce false breakouts, so manage risk appropriately.
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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.