This EUR/JPY 1-hour chart reveals a well-defined falling wedge pattern, which is a bullish reversal formation. Additionally, we see key support and resistance levels, a double bottom, and a breakout potential that traders can use to plan an entry. Let’s dissect this chart in a professional and detailed manner to understand the trade setup and market psychology.
🔹 Market Trend & Structure Analysis
The market was previously in an uptrend, making higher highs and higher lows, until it faced strong resistance at the 163.500 level. Upon reaching this zone, the price reversed downward, forming a series of lower highs and lower lows, which resulted in a falling wedge pattern.
This downward movement was accompanied by a trendline break, signaling a shift in momentum. The price has since reached a strong support level and is showing signs of potential bullish reversal.
🔹 Key Technical Patterns & Indicators
1️⃣ Falling Wedge Pattern (Bullish Reversal Signal)
A falling wedge is a pattern characterized by two downward-sloping trendlines that converge, indicating that selling pressure is weakening. This pattern is considered a bullish signal because:
✔️ The declining price movement shows exhaustion of sellers.
✔️ Volume typically decreases as the wedge forms, indicating a breakout is coming.
✔️ Once price breaks out of the wedge, a strong bullish move often follows.
The key here is to wait for a breakout above the upper trendline, which will confirm the bullish momentum.
2️⃣ Double Bottom Formation at Support (Reversal Confirmation)
The price tested the 160.500 support level twice, forming a double bottom pattern. This is another bullish sign, as it indicates:
✔️ Buyers are actively defending this level.
✔️ There’s strong demand around this price zone.
✔️ If price breaks above the wedge resistance, it could trigger a significant rally.
🔹 Key Support & Resistance Levels
Identifying support and resistance is crucial for defining entry and exit points.
✅ Support Levels:
160.500 – Strong horizontal support (Price tested this twice).
158.982 – Stop-loss level (Below this, the bullish setup is invalid).
✅ Resistance Levels:
163.500 – Major resistance (Previous high and supply zone).
165.090 – Final target (Key breakout level).
If the price successfully breaks out of the wedge, it has room to rise significantly, with 163.500 as the first target and 165.090 as the ultimate goal.
🔹 Trade Setup & Execution Plan
🎯 Bullish Breakout Trade Strategy
Since this setup signals a potential reversal, here’s how traders can execute a high-probability trade:
🔹 Entry Points:
✅ Aggressive Entry: Enter as soon as price breaks above the wedge resistance.
✅ Conservative Entry: Wait for a breakout and a retest of the resistance-turned-support before entering.
🔹 Target Levels:
🎯 First target: 163.500 (Previous resistance level).
🎯 Final target: 165.090 (Major resistance zone).
🔹 Stop-Loss Placement:
❌ Place the stop loss below 158.982, as a break below this level would invalidate the bullish setup.
🔹 Risk-Reward Ratio & Trade Justification
📈 Why This Trade Has a High Potential Reward?
Low-risk, high-reward: The stop loss is tight, while the upside potential is large.
Confluence of bullish signals: Falling wedge + Double bottom + Strong support.
Institutional interest likely: Buyers are stepping in at key levels.
A proper risk-to-reward ratio (RRR) for this trade would be at least 1:3, meaning for every 1% risk, there’s a 3% profit potential. This makes it a great swing trading setup.
🔹 Market Psychology Behind the Setup
The falling wedge represents a market correction after a strong bullish trend.
The double bottom shows that sellers are exhausted and buyers are gaining control.
If price breaks out, many traders will enter, triggering a strong upward rally.
This bullish breakout setup aligns with the smart money concept, where institutions accumulate positions before a big move.
🔹 Final Thoughts & Trade Outlook
This EUR/JPY setup presents a high-probability trade opportunity with a bullish breakout scenario. The combination of:
✅ Falling Wedge Pattern (Bullish reversal)
✅ Double Bottom at Support (Buyers stepping in)
✅ Key Resistance Targets (Clear trade exit points)
…creates a great trading setup.
📌 Trading Plan Summary:
✔️ Buy on breakout above the falling wedge.
✔️ Target 163.500 & 165.090 for profits.
✔️ Stop-loss below 158.982 for risk management.
🚀 If executed correctly, this trade has the potential for strong bullish momentum. Would you like a real-time update once the price confirms the breakout? Let’s keep an eye on this trade! 📊🔥
🔹 Market Trend & Structure Analysis
The market was previously in an uptrend, making higher highs and higher lows, until it faced strong resistance at the 163.500 level. Upon reaching this zone, the price reversed downward, forming a series of lower highs and lower lows, which resulted in a falling wedge pattern.
This downward movement was accompanied by a trendline break, signaling a shift in momentum. The price has since reached a strong support level and is showing signs of potential bullish reversal.
🔹 Key Technical Patterns & Indicators
1️⃣ Falling Wedge Pattern (Bullish Reversal Signal)
A falling wedge is a pattern characterized by two downward-sloping trendlines that converge, indicating that selling pressure is weakening. This pattern is considered a bullish signal because:
✔️ The declining price movement shows exhaustion of sellers.
✔️ Volume typically decreases as the wedge forms, indicating a breakout is coming.
✔️ Once price breaks out of the wedge, a strong bullish move often follows.
The key here is to wait for a breakout above the upper trendline, which will confirm the bullish momentum.
2️⃣ Double Bottom Formation at Support (Reversal Confirmation)
The price tested the 160.500 support level twice, forming a double bottom pattern. This is another bullish sign, as it indicates:
✔️ Buyers are actively defending this level.
✔️ There’s strong demand around this price zone.
✔️ If price breaks above the wedge resistance, it could trigger a significant rally.
🔹 Key Support & Resistance Levels
Identifying support and resistance is crucial for defining entry and exit points.
✅ Support Levels:
160.500 – Strong horizontal support (Price tested this twice).
158.982 – Stop-loss level (Below this, the bullish setup is invalid).
✅ Resistance Levels:
163.500 – Major resistance (Previous high and supply zone).
165.090 – Final target (Key breakout level).
If the price successfully breaks out of the wedge, it has room to rise significantly, with 163.500 as the first target and 165.090 as the ultimate goal.
🔹 Trade Setup & Execution Plan
🎯 Bullish Breakout Trade Strategy
Since this setup signals a potential reversal, here’s how traders can execute a high-probability trade:
🔹 Entry Points:
✅ Aggressive Entry: Enter as soon as price breaks above the wedge resistance.
✅ Conservative Entry: Wait for a breakout and a retest of the resistance-turned-support before entering.
🔹 Target Levels:
🎯 First target: 163.500 (Previous resistance level).
🎯 Final target: 165.090 (Major resistance zone).
🔹 Stop-Loss Placement:
❌ Place the stop loss below 158.982, as a break below this level would invalidate the bullish setup.
🔹 Risk-Reward Ratio & Trade Justification
📈 Why This Trade Has a High Potential Reward?
Low-risk, high-reward: The stop loss is tight, while the upside potential is large.
Confluence of bullish signals: Falling wedge + Double bottom + Strong support.
Institutional interest likely: Buyers are stepping in at key levels.
A proper risk-to-reward ratio (RRR) for this trade would be at least 1:3, meaning for every 1% risk, there’s a 3% profit potential. This makes it a great swing trading setup.
🔹 Market Psychology Behind the Setup
The falling wedge represents a market correction after a strong bullish trend.
The double bottom shows that sellers are exhausted and buyers are gaining control.
If price breaks out, many traders will enter, triggering a strong upward rally.
This bullish breakout setup aligns with the smart money concept, where institutions accumulate positions before a big move.
🔹 Final Thoughts & Trade Outlook
This EUR/JPY setup presents a high-probability trade opportunity with a bullish breakout scenario. The combination of:
✅ Falling Wedge Pattern (Bullish reversal)
✅ Double Bottom at Support (Buyers stepping in)
✅ Key Resistance Targets (Clear trade exit points)
…creates a great trading setup.
📌 Trading Plan Summary:
✔️ Buy on breakout above the falling wedge.
✔️ Target 163.500 & 165.090 for profits.
✔️ Stop-loss below 158.982 for risk management.
🚀 If executed correctly, this trade has the potential for strong bullish momentum. Would you like a real-time update once the price confirms the breakout? Let’s keep an eye on this trade! 📊🔥
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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.