EUR/USD 1H Chart Analysis – Falling Wedge Breakout StrategyOverview of the Chart
The EUR/USD 1-hour chart is forming a falling wedge pattern, which is a bullish reversal setup. This indicates that although the price has been trending downward, the selling pressure is weakening, and a breakout to the upside is becoming more likely.
Currently, the price has broken above the wedge, signaling potential trend reversal. However, traders should watch for a retest of the breakout level to confirm whether the price holds above the resistance-turned-support area before further upward movement.
Key Components of the Chart
1️⃣ Falling Wedge Pattern (Bullish Reversal Signal)
A falling wedge consists of two downward-sloping trendlines that converge, showing a narrowing price range. This pattern is formed when:
The price makes lower highs and lower lows, indicating a downtrend.
The slope of the lower trendline is less steep than the upper one, meaning sellers are losing momentum.
Eventually, the price breaks out above the upper trendline, confirming a bullish reversal.
2️⃣ Support & Resistance Levels
✅ Support Zone (Key Demand Area)
The price recently tested a strong support level (highlighted in beige), where buyers aggressively entered the market.
This level has held multiple times, indicating that buyers are stepping in whenever the price reaches this zone.
The green upward arrow suggests that this is a key accumulation area, where demand is stronger than supply.
🚫 Resistance Zone (Profit Target)
The resistance zone near 1.09450 is the first major target for bulls.
Historically, price action has struggled to break through this level, making it a logical place to take profits.
3️⃣ Breakout Confirmation & Retest
The price has successfully broken out above the falling wedge, which is a strong buy signal.
However, a retest of the breakout level (marked by the yellow circle) might occur before further bullish continuation.
If the price retests and holds above the previous resistance (now support), this will confirm the breakout and provide an additional buying opportunity.
Trade Execution Strategy
📌 Entry Point:
Enter a long trade after the breakout confirmation.
For conservative traders, waiting for a successful retest before entering can reduce risk.
📌 Stop-Loss Placement:
Place a stop loss just below the recent swing low at 1.07541 to limit downside risk.
This ensures that if the breakout fails, the trade is exited with minimal loss.
📌 Profit Target:
The first take-profit target is at 1.09450, the key resistance level.
If bullish momentum continues, traders can look for higher targets based on price action.
📌 Risk-to-Reward Ratio:
This setup provides a favorable risk-to-reward ratio, meaning that potential profits outweigh the risk taken on the trade.
Technical Indicators Supporting the Trade
📈 Trend Reversal Signals
The market has been in a downtrend, but the falling wedge signals a potential reversal.
A higher low after the breakout would further confirm the uptrend.
📊 Volume Confirmation
Ideally, a breakout should be accompanied by increased volume, showing strong buying pressure.
If volume is low, a false breakout could occur, requiring careful trade management.
🔍 Retest & Price Action
A retest of the breakout level should hold above the wedge to confirm bullish momentum.
If the price fails to hold and falls back below, the breakout may have been a fakeout, meaning traders should exit or wait for re-entry.
Risk Management & Trade Considerations
Always use a stop-loss to manage risk.
If the price fails to stay above the breakout level, consider exiting early.
Watch for external market factors such as news events or economic data releases, which can impact EUR/USD volatility.
Conclusion: Bullish Momentum is Building 🚀
This falling wedge breakout on the EUR/USD chart provides a high-probability long trade setup. As long as price holds above the breakout level, bullish continuation toward 1.09450 is expected. Traders should monitor price action carefully and adjust their positions accordingly to maximize gains while managing risks.
