AUD/JPY Chartpack - Technicals, Trading & Hedging Setup

AUD/JPY Rising Wedge Signifies Minor Uptrend, But Major Downtrend Intact on Head & Shoulder Pattern – Trading & Hedging Setup:

AUDJPY minor trend has been travelling through rising wedge pattern, where the interim bulls are currently extending the upswings after the test at the wedge support (refer daily plotting). Consequently, the current price spike above 21-DMAs as the pair shows vigorous rallies today about 0.72%, as a result, bullish engulfing pattern candle at 74.840 levels.

For now, more rallies are likely as both the leading and lagging oscillators are in bullish bias.

RSI and Stochastic curves are showing upward convergence to the prevailing upswings that indicates the strength and buying momentum in the minor uptrend. 

On a broader perspective, head and shoulder pattern has occurred on the major downtrend with head at 105.433, shoulder 1 at 90.027 and shoulder 2 at 90.305 levels (refer monthly chart).

Bears, in the major downtrend, disregard hammer formation at strong support of 78.578 levels , downtrend extends on the head and shoulder pattern. 

RSI, stochastic curves, DMA and MACD are bearish bias on this timeframe.

Trade tips:

Considering all the above technical rationale, on trading grounds, at spot reference: $1,517.95 levels, one can think of trading one touch call options spread with upper strikes of $1,531 levels.

Overall, as we could foresee further downtrend in the months to come, on hedging grounds we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards below 70.500 levels in the medium run. Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position (spot reference: 74.800 level).