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What happens if EURUSD breaks a wedge?

The break of this wedge eventually lead to a massive loss of more than 3,000 pips for the most heavily-traded currency pair. The chart above shows a large rising wedge that had formed on the EURUSD daily time frame over the course of ten months. There are two things I want to point out about this particular pattern.

What happens when a Wedge breaks out?

When a wedge breaks out, it is typically in the opposite direction of the wedge – marking a reversal of the prior trend. Wedges can be tricky to identify since the trend preceding the formation of the wedge can be encompassed partially or entirely within the wedge itself.

What is a wedge reversal?

The reversal signaled by the wedge may be either an intermediate reversal within the larger trend or a long-term reversal. Wedge patterns are typically a result of consolidation following a strong trend, but in contrast to triangle patterns they indicate a weakening of the prior trend rather than a strengthening.

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