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.