EUR/JPY Daily Chart – Rising Wedge Pattern

EUR/JPY Daily Chart – Rising Wedge Pattern Suggests Bearish Reversal Ahead
🔍 Market Context & Structure
The EUR/JPY pair has been consolidating within a rising wedge formation on the daily chart — a pattern that often precedes bearish reversals. This technical setup has developed after a strong rally off the March 2025 lows, with price pushing toward a well-defined resistance zone.

Price action has been making higher highs and higher lows, but the slope of the highs is flattening, while lows are rising more steeply — forming a rising wedge.

The wedge terminates just beneath a key resistance zone around 164.50–165.00, which has historically acted as a ceiling for price (see October 2024 and March 2025).

Momentum is showing signs of slowing down, which reinforces the case for a potential reversal.

📐 Technical Pattern: Rising Wedge
Rising wedges are bearish reversal patterns, especially effective when appearing near major resistance or after a strong uptrend.

Upper Trendline: Connects recent highs with diminishing momentum.

Lower Trendline: Steep support line connecting recent higher lows.

The wedge’s narrowing structure indicates a potential exhaustion of buying power and increasing vulnerability to a breakdown.

📊 Key Zones and Levels
🔹 Resistance Zone: 164.50 – 165.00
Rejected multiple times; where the wedge peaks.

🔹 Support Zone (Target): 154.85
Previous demand zone and structure base; likely to attract buyers if price reaches.

🔹 TP (Take Profit): Around 159.00
Mid-range support, and likely first reaction area on a drop.

🔹 SL (Stop Loss): 167.99
Above the most recent swing high — invalidates the pattern if broken.

📈 Bearish Trade Setup
This is a swing short setup with a favorable risk-reward profile based on the wedge breakdown hypothesis.

🛠️ Trade Plan:
Entry Trigger:
Look for a clean daily close below the wedge support (trendline break), ideally with increasing volume and/or a bearish engulfing candle.

Optional Conservative Entry:
Enter on the pullback to the broken support trendline or the resistance zone, confirming the new lower high.

🎯 Targets:
TP1: 159.00 – first major structure level.

TP2 (Final Target): 154.85 – previous swing low and support zone.

🚫 Stop-Loss:
Set above the wedge resistance at 167.99, giving the trade breathing room while protecting against invalidation.

⚖️ Risk-Reward Profile:
Assuming entry near 163.50:

TP1: ~450 pips

TP2: ~850+ pips

SL: ~450 pips
🟩 Potential R:R of 1:1 to 1:2, depending on entry and target levels.

🔄 Alternative Scenario (Invalidation):
If price breaks above 167.99 and holds above the resistance zone, the wedge pattern is invalidated.

This could signal a continuation toward the 170.00 psychological level.

🧠 Final Notes & Considerations:
Always wait for confirmation before entering.

Monitor fundamental drivers — especially ECB and BoJ policy decisions or economic data — as they may impact volatility.

Rising wedges can sometimes produce false breakouts, so manage risk appropriately.