The bullish setup emerges as Monero gears up to undergo a major hard fork in July 2022.
Monero (XMR) price dropped by nearly 10% three days after establishing a week-to-date high of around $290 on April 24.
Nonetheless, several technical indicators suggest that the XMR/USD pair is poised to resume its uptrend over the next few months.
Falling wedge breakout underway
Notably, XMR's price broke out of its "falling wedge" structure in late March. It continued its move upside in the later daily sessions, with rising volumes indicating bullish sentiment among Monero traders.
Traditional analysts consider falling wedges as bullish reversal patterns, i.e., the price first consolidates within a contracting, descending channel, followed by a strong bounce to the upside.
As a rule, the falling wedge's breakout target comes to be near the level at length equal to the maximum distance between the pattern's lower and upper trendline.
The XMR's falling wedge is up to nearly $250-long. Meanwhile, the structure's breakout point sits around $210. As a result of this, the Monero token's upside target comes to be near $470, up more than 75% from today's price.
Nevertheless, XMR still needs to close above $300, a psychological resistance level, to confirm its move toward the falling wedge target.
Monero hard fork ahead
XMR's bullish outlook also appears in the months leading up to Monero's hard fork.
Notably, Monero will undergo a tentative protocol upgrade in July, preceding a testnet deployment in May.
The update aims to increase the ring size from 11 to 16 to ensure that XMR transactions have larger anonymity set to make it harder to find the transaction source.
The hard fork announcement has appeared against the backdrop of rising demand for privacy coins amid geopolitical and economic turmoil.
Short-term correction risks
XMR's strong fundamentals underpin its bullish wedge setup. Nonetheless, Monero is also at risk of retracement in the short term.
XMR has corrected lower after testing $278 repeatedly as resistance in the last three days, raising the possibility that it could continue lower.
This would present the next downside target appears near $227, coinciding with the 0.236 Fib line of the Fibonacci retracement graph, drawn from the $493-swing high to the $145-swing low.