Potential Setup for JPY/USD: Double Top and Wedge Pattern Analys

The JPY/USD pair is showing signs of a major trend reversal, with a potential double top pattern forming. While there was a bullish trend earlier, it officially ended with the penetration of the trendline in early August 2024, marking the shift to a potential bearish structure.

Currently, the market appears to be in the second leg of the double top, signaling the possibility of a major reversal. This setup could take one of three forms:
• A higher high double top, indicating a false breakout.
• A lower high double top, confirming weaker buying momentum.
• A double top with equal highs, aligning with a classical reversal pattern.


Key Observations

1. Resistance Zone Around 160
Price is expected to test the resistance zone near 160, which aligns with the potential peak of the double top. Traders should look for a rejection signal to confirm the resistance level's strength.
2. Wedge Blow-Off Above the Upper Channel Line
The first sign of a reversal may be a blow-off in the wedge pattern, as the price moves above the upper channel line. This would indicate exhaustion in the upward momentum and the beginning of a bearish reversal.
3. Retest or Pullback Scenarios
o If the price breaks through the resistance zone, wait for a retest of the 160 level to confirm it as a false breakout.
o If the price starts to decline without reaching the resistance zone, traders should watch for a pullback to the EMAs. A death cross—where the 20 EMA crosses below the 50 EMA—will provide further confirmation of bearish momentum.
4. Trading Range and Micro Double Top Formation
The price may enter a trading range after rejection at the resistance zone or following a breakout. Within this range, we can expect the development of a micro double top pattern, which could serve as a precursor to further downside. This setup would reinforce bearish momentum and provide additional entry opportunities.

Target Levels

1. First Target – 150 Zone
The initial target lies near the 150 level, which aligns with a key Fibonacci retracement. At this zone, we can expect a pullback before further downside.
o If the 150 zone is penetrated, traders should move their stop-loss to the pullback level for protection.
o Additionally, traders may choose to add to their existing short positions during the pullback, depending on the structure of the retracement.

2. Second Target – Beginning of the Wedge

The final target for the double top setup is the beginning of the wedge pattern, representing a major support level and the structural low before the second leg formed.

Strategy Recommendations

• Entry Points: Monitor price action closely around the 160 resistance zone. Rejection at this level would strongly support the double top scenario.
• Pullback Entry: If a wedge blow-off or initial decline occurs, consider entering short positions during pullbacks to the EMAs, especially as the 20 EMA crosses below the 50 EMA.
• Stop-Loss Management: Use a trailing stop to protect profits as the price moves toward target levels. Adjust stop-loss levels after pullbacks, particularly after penetration of the 150 zone.
• Second Entry Opportunity: Look for a second short entry after pullbacks to the EMAs to strengthen your position.


The JPY/USD pair offers a compelling setup for a major trend reversal, supported by clear technical signals. The current price action suggests a second leg of the double top is forming, and traders should remain vigilant around the 160 resistance zone. With the 150 zone as the initial target and the wedge’s starting point as the final target, traders can capitalize on multiple opportunities by combining pullback entries, stop-loss adjustments, and trailing stops to effectively manage risk and maximize potential gains.