🔍 Full Technical Analysis of JPY/USD (Daily Timeframe)
🧭 Overview
The chart shows a sophisticated price structure unfolding over several months. A falling wedge reversal pattern formed during a sustained downtrend, which later transitioned into a bullish breakout and continuation. This analysis provides insights into market behavior, price psychology, and a high-probability trading opportunity supported by classical technical analysis principles.
🔶 1. Market Context & Structure
Before diving into the pattern, it’s essential to understand the macro structure of the chart:
The pair experienced a strong bearish move from around August to December 2024, marked by lower highs and lower lows.
During this decline, volatility gradually decreased, which often indicates seller exhaustion.
A reversal zone emerged near a major support region — historically significant and previously tested.
🔷 2. The Falling Wedge Pattern (Reversal Signal)
A falling wedge is a bullish reversal pattern that forms when price is in a downtrend but begins to consolidate within converging trendlines. This pattern typically signals that the downtrend is losing momentum and a breakout to the upside is imminent.
📌 Characteristics of This Wedge:
Downward Convergence: The highs and lows begin to narrow over time, indicating reduced selling pressure.
Volume Decline (Implied): Though not displayed, falling wedges usually see volume dry up before breakout.
Duration: This wedge developed over several months (October 2024 – January 2025), lending strength to the pattern.
False Break Attempts: Several lower spikes failed to break the support, showing buying interest building.
✅ Bullish Breakout:
The breakout occurred decisively in late January 2025, with a large bullish candlestick closing above the upper wedge boundary — a confirmed breakout.
Post-breakout, the price rallied strongly, indicating that buyers were firmly in control.
🔷 3. Support & Resistance Zones
🔽 Support Zone (Demand Area):
Range: 0.006300 – 0.006400
Historical pivot zone where price previously reversed, now serving as a demand base.
The lower wick rejections near this zone reinforce it as a high liquidity zone for buyers.
🔼 Resistance Zone (Supply Area):
Range: 0.006850 – 0.006950
This area capped price during several prior rally attempts, making it a key breakout point.
Once price broke above this zone, it became a support flip zone, indicating trend reversal confirmation.
🎯 Target Level:
Marked at 0.007126, derived from a measured move:
Measure the height of the wedge at its widest point.
Project this vertically from the breakout level.
This target aligns with psychological round numbers and prior resistance, adding confluence.
🔶 4. Post-Breakout Price Action: Bullish Retest
A breakout is only the first part of a trade; the retest phase confirms the move and offers an optimal entry.
🔁 Retest Details:
After reaching the resistance zone, price pulled back, testing both:
The broken wedge trendline (now acting as dynamic support).
The horizontal structure support zone near 0.006650–0.006700.
A bullish engulfing candle or similar reversal pattern formed at this level — a classic retest entry.
📌 Trendline Respect:
A rising dotted trendline was drawn from the breakout low through higher lows.
This line acted as price memory and was respected multiple times, reinforcing the uptrend.
🔷 5. Trade Setup Breakdown
This is a swing trade setup based on pattern breakout, structural confluence, and trend continuation. Here's how it’s structured:
Component Details
Pattern Falling Wedge (Reversal)
Trade Bias Long (Buy)
Entry Price ~0.006700
Stop Loss 0.006614 (below trendline)
Target Price 0.007126 (measured wedge move)
R/R Ratio Approx. 3:1
Timeframe Daily (Medium-term swing)
🧠 6. Market Psychology & Behavior
Understanding the sentiment behind the candles is critical:
❗ Before the Breakout:
Sellers dominated but with weakening momentum.
Each push down was met with buying strength, seen in long wicks and smaller-bodied candles.
✅ At the Breakout:
Buyers overwhelmed sellers, often with a volume spike and wide-bodied green candle.
This is usually driven by institutional positioning and stop-loss triggering from short-sellers.
🔁 During the Retest:
Some retail traders exited prematurely, fearing a fakeout.
Smart money used the dip to accumulate positions, confirmed by the bounce from trendline.
🔼 Continuation Rally:
Strong continuation candle signals momentum traders entering.
Break above resistance signals a shift in sentiment and structure.
🛠️ 7. Strategy Notes & Professional Tips
📌 Risk Management:
Never risk more than 1–2% of capital.
Use dynamic trailing stop if price breaks above target zone.
📌 Trade Confirmation Ideas:
Look for volume spikes on breakout candles.
Use RSI or MACD divergence to confirm reversal (optional).
Look for candlestick patterns (engulfing, pin bar) on retests.
📌 Exit Plan:
Partial exit at key resistance.
Full exit at projected target or if price forms reversal signs (e.g., doji at resistance).
✅ Final Summary
This JPY/USD chart demonstrates an exemplary price action-based trading setup rooted in:
A well-formed falling wedge (bullish reversal).
Clean breakout + retest + continuation structure.
Multiple confluence factors: trendline, horizontal S/R, pattern projection.
Professional-grade risk/reward profile with a logical entry, stop, and target.
This kind of setup is highly favored among swing traders, price action purists, and institutional-level strategists due to its clarity and predictability.
🧭 Overview
The chart shows a sophisticated price structure unfolding over several months. A falling wedge reversal pattern formed during a sustained downtrend, which later transitioned into a bullish breakout and continuation. This analysis provides insights into market behavior, price psychology, and a high-probability trading opportunity supported by classical technical analysis principles.
🔶 1. Market Context & Structure
Before diving into the pattern, it’s essential to understand the macro structure of the chart:
The pair experienced a strong bearish move from around August to December 2024, marked by lower highs and lower lows.
During this decline, volatility gradually decreased, which often indicates seller exhaustion.
A reversal zone emerged near a major support region — historically significant and previously tested.
🔷 2. The Falling Wedge Pattern (Reversal Signal)
A falling wedge is a bullish reversal pattern that forms when price is in a downtrend but begins to consolidate within converging trendlines. This pattern typically signals that the downtrend is losing momentum and a breakout to the upside is imminent.
📌 Characteristics of This Wedge:
Downward Convergence: The highs and lows begin to narrow over time, indicating reduced selling pressure.
Volume Decline (Implied): Though not displayed, falling wedges usually see volume dry up before breakout.
Duration: This wedge developed over several months (October 2024 – January 2025), lending strength to the pattern.
False Break Attempts: Several lower spikes failed to break the support, showing buying interest building.
✅ Bullish Breakout:
The breakout occurred decisively in late January 2025, with a large bullish candlestick closing above the upper wedge boundary — a confirmed breakout.
Post-breakout, the price rallied strongly, indicating that buyers were firmly in control.
🔷 3. Support & Resistance Zones
🔽 Support Zone (Demand Area):
Range: 0.006300 – 0.006400
Historical pivot zone where price previously reversed, now serving as a demand base.
The lower wick rejections near this zone reinforce it as a high liquidity zone for buyers.
🔼 Resistance Zone (Supply Area):
Range: 0.006850 – 0.006950
This area capped price during several prior rally attempts, making it a key breakout point.
Once price broke above this zone, it became a support flip zone, indicating trend reversal confirmation.
🎯 Target Level:
Marked at 0.007126, derived from a measured move:
Measure the height of the wedge at its widest point.
Project this vertically from the breakout level.
This target aligns with psychological round numbers and prior resistance, adding confluence.
🔶 4. Post-Breakout Price Action: Bullish Retest
A breakout is only the first part of a trade; the retest phase confirms the move and offers an optimal entry.
🔁 Retest Details:
After reaching the resistance zone, price pulled back, testing both:
The broken wedge trendline (now acting as dynamic support).
The horizontal structure support zone near 0.006650–0.006700.
A bullish engulfing candle or similar reversal pattern formed at this level — a classic retest entry.
📌 Trendline Respect:
A rising dotted trendline was drawn from the breakout low through higher lows.
This line acted as price memory and was respected multiple times, reinforcing the uptrend.
🔷 5. Trade Setup Breakdown
This is a swing trade setup based on pattern breakout, structural confluence, and trend continuation. Here's how it’s structured:
Component Details
Pattern Falling Wedge (Reversal)
Trade Bias Long (Buy)
Entry Price ~0.006700
Stop Loss 0.006614 (below trendline)
Target Price 0.007126 (measured wedge move)
R/R Ratio Approx. 3:1
Timeframe Daily (Medium-term swing)
🧠 6. Market Psychology & Behavior
Understanding the sentiment behind the candles is critical:
❗ Before the Breakout:
Sellers dominated but with weakening momentum.
Each push down was met with buying strength, seen in long wicks and smaller-bodied candles.
✅ At the Breakout:
Buyers overwhelmed sellers, often with a volume spike and wide-bodied green candle.
This is usually driven by institutional positioning and stop-loss triggering from short-sellers.
🔁 During the Retest:
Some retail traders exited prematurely, fearing a fakeout.
Smart money used the dip to accumulate positions, confirmed by the bounce from trendline.
🔼 Continuation Rally:
Strong continuation candle signals momentum traders entering.
Break above resistance signals a shift in sentiment and structure.
🛠️ 7. Strategy Notes & Professional Tips
📌 Risk Management:
Never risk more than 1–2% of capital.
Use dynamic trailing stop if price breaks above target zone.
📌 Trade Confirmation Ideas:
Look for volume spikes on breakout candles.
Use RSI or MACD divergence to confirm reversal (optional).
Look for candlestick patterns (engulfing, pin bar) on retests.
📌 Exit Plan:
Partial exit at key resistance.
Full exit at projected target or if price forms reversal signs (e.g., doji at resistance).
✅ Final Summary
This JPY/USD chart demonstrates an exemplary price action-based trading setup rooted in:
A well-formed falling wedge (bullish reversal).
Clean breakout + retest + continuation structure.
Multiple confluence factors: trendline, horizontal S/R, pattern projection.
Professional-grade risk/reward profile with a logical entry, stop, and target.
This kind of setup is highly favored among swing traders, price action purists, and institutional-level strategists due to its clarity and predictability.
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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.