JPY/USD Daily Chart – Falling Wedge Breakout & Bullish Target🔍 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.
