CHF/USD Breakout Setup: Falling Wedge Pattern with Defined Targe

🔍 Pattern Identification: Falling Wedge
A falling wedge is characterized by two downward-sloping and converging trendlines that encapsulate a temporary consolidation within a larger trend.

This pattern typically forms as a corrective phase within an ongoing bullish trend, indicating a potential reversal or breakout to the upside.

In the chart, the wedge is clearly outlined with blue diagonal lines, capturing the recent lower highs and lower lows.

Psychology Behind the Pattern:

Sellers are gradually losing momentum, as evidenced by the decreasing volatility and shorter candles near the wedge’s apex.

As the price tightens, pressure builds for a breakout, which in bullish trends often occurs to the upside.

📊 Market Context and Price Structure
🔼 Prior Trend:
A strong bullish move precedes the wedge, indicated by a sequence of higher highs and higher lows.

This sets the stage for the falling wedge to act as a bullish continuation pattern.

⬇️ Inside the Wedge:
The price ranges between 1.2170 (upper boundary) and 1.2044 (lower boundary), compressing in volatility.

Small-bodied candles suggest indecision and low volume, which are often precursors to breakout activity.

🔁 Trade Setup
📌 Entry:
Ideal entry is at or just above the breakout point of the wedge’s upper resistance line.

The current price (as of the breakout) is around 1.2119, confirming the move above the pattern’s resistance.

🎯 Target (Take Profit):
Target Price: 1.2201

This level is calculated using the measured move technique, projecting the height of the wedge (from highest to lowest point) and adding it to the breakout zone.

Additionally, 1.2201 aligns with a prior area of resistance, adding confluence.

🛡️ Stop Loss:
Stop Loss: 1.2044

Positioned slightly below the lower wedge boundary to allow for some volatility without prematurely closing the trade.

This level provides a logical technical invalidation point: if price falls below the wedge support, the setup is likely invalid.

⚖️ Risk-Reward Ratio
Entry: 1.2119

Target: 1.2201

Stop Loss: 1.2044

Risk-Reward Ratio: Approximately 1:2.5, which is favorable for most swing or intraday strategies.

📈 Key Horizontal Levels
High: 1.2174 – recent swing high, could act as interim resistance.

Low: 1.1973 – strong support from a previous reaction point.

Resistance Zone: 1.2170–1.2201 – key breakout and target area.

Support Zone: 1.2044 and below – prior demand zone.

⚠️ Additional Considerations
📌 Confirmation Tools (Optional but Recommended):
Volume Spike: Increased buying volume can confirm breakout strength.

Momentum Indicators: RSI or MACD showing bullish divergence adds confidence.

Retest Entry: If price retests the broken wedge resistance as new support, it can offer a safer entry point.

🌐 Macroeconomic Factors:
CHF and USD are both considered safe-haven currencies. Market volatility can arise due to:

U.S. economic data (CPI, FOMC statements)

Swiss National Bank (SNB) interventions or policy announcements

Global risk sentiment shifts

📘 Summary
This chart provides a textbook example of a falling wedge breakout trade in the CHF/USD pair. With a clean technical setup, clear entry and exit levels, and a favorable risk-to-reward profile, this trade idea aligns well with bullish continuation strategies.

Remember: Always manage risk according to your trading plan and consider broader market context before executing trades.