GBP/USD – Bullish Falling Wedge Breakout Setup

GBP/USD – Bullish Falling Wedge Breakout Setup | 1H Technical Breakdown
Pair: GBP/USD (British Pound / U.S. Dollar)
Timeframe: 1H (Hourly)
Published: May 4, 2025
Platform: OANDA
Technical Pattern: Falling Wedge (Bullish Reversal)

🔍 Chart Pattern Breakdown: Falling Wedge
The primary structure visible on the chart is a Falling Wedge, a classic bullish reversal pattern. This pattern occurs when price consolidates between two downward-sloping trendlines that converge. The pattern reflects diminishing bearish momentum, often leading to a strong upside breakout once buyers regain control.

Key Characteristics:
Sloping Resistance Line: Connects the lower highs.

Sloping Support Line: Connects the lower lows but converges with resistance.

Volume Typically Declines during wedge formation, suggesting fading selling pressure.

Breakout Direction: Bullish (to the upside) once resistance is broken.

🧭 Technical Structure and Price Behavior
1. Falling Wedge Formation
The wedge began forming after a strong uptrend.

Lower highs and lower lows developed within the wedge boundaries.

Price has now reached the apex, a common point where breakouts occur.

2. Support Zone (~1.3245–1.3260):
Price has tested this zone multiple times, forming a base.

This horizontal zone also aligns with the lower wedge trendline.

Repeated bounces here indicate accumulation and buyer interest.

3. Resistance Zone (~1.3300–1.3320):
Minor horizontal resistance aligns with the wedge’s descending upper boundary.

A confirmed candle close above this zone would indicate a breakout and trigger a long entry.

🎯 Trade Setup and Strategy
This chart presents a well-defined long trading setup based on a potential breakout from the falling wedge.

Trade Element Level / Description
Entry Point On confirmed breakout above 1.3300–1.3320
Take Profit 1 1.33342 – First key resistance
Take Profit 2 1.33880 – Previous high and full wedge target
Stop Loss 1.31806 – Below wedge and horizontal support

💡 Trade Rationale
Bullish Reversal Potential: The wedge signals exhaustion in the prior downtrend.

Multiple Support Bounces: Validates the 1.3250 zone as a strong buy area.

Positive Risk-to-Reward Ratio: Clear SL and layered TP structure offer good RR (2:1+).

Structure-Based Trading: Combines pattern breakout with horizontal zones.

🧠 Price Action Insights
The most recent candle has tested wedge support again and shows signs of a rejection wick, hinting at bullish pressure.

If price forms a higher low within support and breaks resistance, it may trigger a strong push toward 1.3334 and possibly 1.3388.

This move would invalidate the prior lower-highs sequence, completing the wedge breakout.

⚠️ Risk Management & Considerations
False Breakout Risk: Wait for a clear 1H candle close above resistance to confirm breakout.

Volatility Factors: Be aware of upcoming U.S. or U.K. economic events (jobs data, interest rate decisions, CPI).

Trailing Stops: Consider adjusting stops to breakeven after TP1 is hit to lock in gains.

✅ Final Summary
GBP/USD is currently showing a textbook Falling Wedge Reversal on the 1H chart. The price is respecting a strong support zone and consolidating within converging trendlines. A breakout above the resistance zone (~1.3300–1.3320) will likely trigger a bullish continuation toward 1.33342 and ultimately 1.33880.

This is a high-probability bullish setup supported by clean technical structure, pattern psychology, and risk management potential.