1. Market Structure & Technical Pattern:
The Japanese Yen (JPY) against the U.S. Dollar (USD) has been exhibiting a clear Rising Wedge Pattern over the past few months. This is a classic bearish reversal pattern, indicating that buying momentum is gradually weakening, and a strong decline is likely to follow.
Formation of the Rising Wedge:
The price has been making higher highs and higher lows, confined within two converging trendlines (black lines).
The lower boundary (support trendline) has been consistently acting as a dynamic support level.
The upper boundary (resistance trendline) has been limiting further upward movement, indicating exhaustion of buying pressure.
Breakout Confirmation:
The price action tested the resistance zone multiple times but failed to sustain bullish momentum.
A strong rejection from the upper resistance level led to a sharp sell-off, causing a breakdown of the support trendline.
Once the price broke below the wedge, selling pressure intensified, confirming the trend reversal.
2. Key Technical Levels & Zones:
Resistance Level (0.006895):
The price previously struggled to break above this resistance zone, forming a strong supply area where sellers dominated.
This level aligns with the upper boundary of the rising wedge, making it a significant turning point.
The rejection from this zone initiated the bearish breakdown.
Support Level (Broken – 0.006650):
This level acted as a strong demand zone, preventing further downside movement during the wedge formation.
However, once the price broke below this level, it confirmed the end of the uptrend and the beginning of a downtrend.
This level may now act as a new resistance (role reversal principle).
Stop Loss Placement (Above 0.006895):
A logical stop-loss is placed just above the resistance level to protect against a potential invalidation of the bearish setup.
If the price closes above this level, the bearish thesis would be invalidated.
3. Trading Execution & Risk Management:
Sell Entry Strategy:
Traders looking for short positions should enter after a confirmed break below the wedge’s support.
A potential pullback (retest) to the broken trendline could offer an additional shorting opportunity.
The retest would confirm the previous support turning into resistance before a continuation of the downtrend.
Take Profit Targets (TP1 & TP2):
TP1 (0.006481):
This level represents a strong demand zone where short-term buyers may step in.
Traders may choose to book partial profits here.
TP2 (0.006251):
This is a deeper support level and the final target for this trade setup.
If the price sustains bearish momentum, it is likely to reach this level before stabilizing.
Risk-to-Reward Ratio Consideration:
This setup offers a high probability short trade with an attractive risk-to-reward ratio.
The stop-loss is well-defined, minimizing potential losses while maximizing profit potential.
4. Expected Price Movement & Projection:
Short-term Outlook:
A possible pullback to the broken wedge (previous support now acting as resistance) before continuation lower.
If the price retests and rejects the 0.006650 level, expect acceleration in the downtrend.
Medium-term Outlook:
If the price reaches TP1 (0.006481) and breaks below, it increases the probability of hitting TP2 (0.006251).
A bearish trend continuation could form, potentially leading to further downside levels.
Invalidation Scenario:
If the price closes above the stop-loss level (0.006895), the bearish setup is invalidated, and a bullish breakout could follow instead.
5. Conclusion & Trading Plan:
The rising wedge breakdown signals a shift from bullish to bearish market sentiment.
Traders should look for short entries after a confirmed breakdown or wait for a pullback before executing trades.
The risk-to-reward ratio makes this a strong high-probability trade setup.
Following the plan with strict stop-loss placement ensures risk is controlled while maximizing profit potential.
6. Summary & Key Takeaways:
✅ Pattern: Rising Wedge (Bearish Reversal)
✅ Breakout Direction: Downside
✅ Resistance Level: 0.006895
✅ Support Levels: 0.006650 (broken), 0.006481 (TP1), 0.006251 (TP2)
✅ Stop-Loss Placement: Above 0.006895
✅ Profit Targets: TP1 – 0.006481, TP2 – 0.006251
✅ Trade Bias: Bearish
The Japanese Yen (JPY) against the U.S. Dollar (USD) has been exhibiting a clear Rising Wedge Pattern over the past few months. This is a classic bearish reversal pattern, indicating that buying momentum is gradually weakening, and a strong decline is likely to follow.
Formation of the Rising Wedge:
The price has been making higher highs and higher lows, confined within two converging trendlines (black lines).
The lower boundary (support trendline) has been consistently acting as a dynamic support level.
The upper boundary (resistance trendline) has been limiting further upward movement, indicating exhaustion of buying pressure.
Breakout Confirmation:
The price action tested the resistance zone multiple times but failed to sustain bullish momentum.
A strong rejection from the upper resistance level led to a sharp sell-off, causing a breakdown of the support trendline.
Once the price broke below the wedge, selling pressure intensified, confirming the trend reversal.
2. Key Technical Levels & Zones:
Resistance Level (0.006895):
The price previously struggled to break above this resistance zone, forming a strong supply area where sellers dominated.
This level aligns with the upper boundary of the rising wedge, making it a significant turning point.
The rejection from this zone initiated the bearish breakdown.
Support Level (Broken – 0.006650):
This level acted as a strong demand zone, preventing further downside movement during the wedge formation.
However, once the price broke below this level, it confirmed the end of the uptrend and the beginning of a downtrend.
This level may now act as a new resistance (role reversal principle).
Stop Loss Placement (Above 0.006895):
A logical stop-loss is placed just above the resistance level to protect against a potential invalidation of the bearish setup.
If the price closes above this level, the bearish thesis would be invalidated.
3. Trading Execution & Risk Management:
Sell Entry Strategy:
Traders looking for short positions should enter after a confirmed break below the wedge’s support.
A potential pullback (retest) to the broken trendline could offer an additional shorting opportunity.
The retest would confirm the previous support turning into resistance before a continuation of the downtrend.
Take Profit Targets (TP1 & TP2):
TP1 (0.006481):
This level represents a strong demand zone where short-term buyers may step in.
Traders may choose to book partial profits here.
TP2 (0.006251):
This is a deeper support level and the final target for this trade setup.
If the price sustains bearish momentum, it is likely to reach this level before stabilizing.
Risk-to-Reward Ratio Consideration:
This setup offers a high probability short trade with an attractive risk-to-reward ratio.
The stop-loss is well-defined, minimizing potential losses while maximizing profit potential.
4. Expected Price Movement & Projection:
Short-term Outlook:
A possible pullback to the broken wedge (previous support now acting as resistance) before continuation lower.
If the price retests and rejects the 0.006650 level, expect acceleration in the downtrend.
Medium-term Outlook:
If the price reaches TP1 (0.006481) and breaks below, it increases the probability of hitting TP2 (0.006251).
A bearish trend continuation could form, potentially leading to further downside levels.
Invalidation Scenario:
If the price closes above the stop-loss level (0.006895), the bearish setup is invalidated, and a bullish breakout could follow instead.
5. Conclusion & Trading Plan:
The rising wedge breakdown signals a shift from bullish to bearish market sentiment.
Traders should look for short entries after a confirmed breakdown or wait for a pullback before executing trades.
The risk-to-reward ratio makes this a strong high-probability trade setup.
Following the plan with strict stop-loss placement ensures risk is controlled while maximizing profit potential.
6. Summary & Key Takeaways:
✅ Pattern: Rising Wedge (Bearish Reversal)
✅ Breakout Direction: Downside
✅ Resistance Level: 0.006895
✅ Support Levels: 0.006650 (broken), 0.006481 (TP1), 0.006251 (TP2)
✅ Stop-Loss Placement: Above 0.006895
✅ Profit Targets: TP1 – 0.006481, TP2 – 0.006251
✅ Trade Bias: Bearish
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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.