EUR/JPY – Rising Wedge Breakdown Signals Bearish Reversal

EUR/JPY – Rising Wedge Breakdown Signals Bearish Reversal
Timeframe: 45-Minute Chart (OANDA)
Pattern: Rising Wedge → Bearish Reversal
Date: May 4, 2025
Current Price: ~163.64
Market Bias: Bearish (short-term)

🧠 Technical Overview:
The EUR/JPY pair recently formed a Rising Wedge pattern, a well-known bearish reversal formation that occurs after a bullish trend. This pattern suggests exhaustion in buying momentum and typically precedes a trend reversal or correction.

🔷 Pattern Description: Rising Wedge
Structure: Two converging trendlines sloping upward.

Psychology: Bulls remain in control but are losing steam. Each higher high is weaker, and buyers are unable to sustain upward momentum.

Breakdown: A decisive break below the lower trendline signals potential for a strong bearish move.

📊 Key Chart Elements:
🔹 Support Zone (~162.40–162.50):
This is the base of the wedge and an important historical support level.

Also acts as the measured target based on the height of the wedge.

🔹 Resistance Zone (~164.80–165.15):
Marked by repeated price rejections.

Final swing high confirms the pattern's upper boundary before the breakdown.

🔹 Breakout & Retest:
The price broke down below the lower wedge support.

There was a retest of the broken trendline, followed by a bearish continuation.

This retest confirms the validity of the breakout and increases the probability of downside continuation.

📌 Trade Setup:
Component Level Rationale
Sell Entry Below 163.65 Confirmed breakdown of wedge
Take Profit (TP) 163.038 Intermediate pullback level
Final Target 162.431 Support zone & wedge height projection
Stop Loss (SL) 165.149 Above wedge resistance and prior swing high

📈 Price Projection Logic:
Measured Move: The height of the wedge (~70–80 pips) is projected downward from the breakdown point.

The final target (162.431) aligns with prior support and the projected move, providing a logical exit for short positions.

📉 Sentiment & Market Context:
Bearish Divergence: Although not shown in the chart, rising wedge formations are often accompanied by bearish RSI or MACD divergence. This may be present.

Risk-Off Flows: If broader market sentiment turns risk-off (e.g., due to geopolitical or economic news), JPY could strengthen, supporting the bearish move in EUR/JPY.

No Major Support Until 162.40: This gives the trade room to run with minimal interference.

⚠️ Risk Management:
Use tight risk control; ensure stop-loss is in place to prevent exposure if the pattern fails.

Avoid entering prematurely—wait for confirmed close below TP zone or retest failure.

Ideal risk-reward ratio exceeds 1:2 if executed correctly.

📌 Conclusion:
The EUR/JPY pair has broken down from a Rising Wedge pattern, signaling a shift in short-term momentum from bullish to bearish. With the breakdown and retest confirmed, the pair is expected to target the 162.431 support level in the coming sessions. This setup offers a textbook technical entry for traders favoring pattern-based strategies, supported by clear structure, defined risk, and a logical target path.